SDL FY2018 Financial Results

30 August 2018
MANAGEMENT DISCUSSION AND ANALYSIS
FY2018 Result Overview
Solution Dynamics Limited (“SDL” or “Company”) has produced an audited net profit after tax of
$1.332 million for FY2018 (growth of 1.7%). This profit includes costs and losses from acquisitions
made late in the financial year, which acted as a significant drag on the Company’s profit. A like-for-
like comparison (backing out the costs and losses from acquisitions) against the prior year saw
pleasing growth in net profit after tax of 18.8%. Highlights of the result are:
• revenue growth of 13.7% to $22.7 million, with revenue from the UK and Europe up $1.0
million or 33.9% to $4.0 million
• EBITDA growth of 8.9% to $2.27 million (growth was 17.1% to $2.44 million excluding the
effects of acquisition costs and losses)
• net cash on hand at 30 June balance date was $1.96 million
• the Directors have declared a final, fully imputed dividend of 3.50 cents per share (FY2017:
3.25 cents), taking the total dividend for FY2017 to 7.50 cents per share (FY2017: 6.75
cents), an increase of 11.1%
In late FY2018, SDL acquired Auckland-based Scantech (scanning and scanning/workflow software)
and US-based DigitalToPrint Inc. (“DTP”), which provides a globally distributed print and mail
solution.

Business Overview
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, outsourced
services and scanning); and
• Software & Technology.
Services includes digital print and mail house processing for mail items such as invoices, statements
and promotional material. These are then distributed through New Zealand Post’s (“NZ Post”) 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 revenue from Scantech is
primarily included in Services (document handling services), while consulting and software revenues
that are related to Scantech’s software technology are included in the Software & Technology
revenue stream.

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Software & Technology develops and markets SDL’s own software products related to a) multi-
channel marketing communications, which includes: a) digital asset management, communication
templates and campaign management, b) document archiving, c) document composition, d) desktop
mail solutions, e) scanning and scanning workflow, and f) international cross-border print-on-
demand management software. A range of further technology services are also offered relating to
SDL’s own software and the management of client data around the formatting, electronic output
and archiving of customer communications. The US business, DTP, acquired by SDL in May 2018 is
wholly included in Software & Technology.
Despite the ongoing erosion of transactional mail volumes, the Directors believe that SDL’s key point
of difference is in offering integrated solutions incorporating both physical print and digital
technology. Some communications are better suited to print and will likely remain so for the
foreseeable future. In other cases, use of software technology such as DéjarMail (SDL’s desktop mail
solution) can improve the handling efficiency, management and cost of physical mail. The
Company’s integrated range of print and software technologies means it is able to offer a holistic
and distribution channel/platform-agnostic approach to managing its customers’ communications
needs.
The Company operates from leased premises in Albany, Auckland.

Acquisitions
SDL made two acquisitions late in the financial year, Scantech in April 2018 and DTP in May 2018.
Scantech is largely a “bolt-on” incremental transaction for the Company. SDL has offered scanning
services to its customers for some time and then subcontracted this work to Scantech and taken a
small margin in the process. Scantech has developed its own, in-house scanning workflow software,
which means it is not reliant on click-cost-based external software to manage its scanning. There are
opportunities to sell Scantech’s software in the UK and customer pilot projects are currently
underway.
DTP is a riskier acquisition for SDL as it is currently unprofitable and is likely to remain so in the
coming financial year. In that sense, the purchase price for SDL is a combination of what has been
paid (plus likely vendor earn-out) plus the cost to fund near-term losses. However, DTP opens two
new opportunities for SDL; cross border printing and a toe-hold into the US market. Cross-border
printing is where a company needs to print and mail for offshore markets. Companies typically have
two options: either print-and-mail from their home country (expensive with international mail rates)
or print in foreign countries (cheaper, but problematic around the logistics of managing a network of
foreign printers, many of whom will have differing print composition requirements). DTP’s software
and network of printer relationships enables cross border printing and SDL was aware from
discussions with existing UK customers that there was a market need for this functionality. Stepping
– carefully – into the US market is an opportunity, but one that will require additional sales and
technical support overhead over time. The Company is already bidding on a sizeable pipeline of
work and the scale of potential revenue from individual opportunities is large, although we are
under no illusions about the difficulty of succeeding in this market. Our initial observation is that the

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switch to electronic in the US, while underway, appears much slower and at a far earlier stage than
in New Zealand.
Both acquisitions are structured with cash upfront payments and subsequent vendor earn-outs for
reaching profit targets. Note that accounting rules now require intangibles to be allocated to items
such as intellectual property and the value of customer contracts, rather than goodwill. Unlike
goodwill, which remains on the balance sheet subject to annual impairment testing, the intangibles
must be written off by amortisation through the Income Statement. SDL is opting to write down
acquired intangibles over a relatively short four to five year period. This means the Company will
incur a non-cash, amortisation charge against profit of around $0.23 million each year for the next
four years. Furthermore, a portion (relating to customer contracts and some of the acquired
software) of this charge is not tax deductible. For the purposes of calculating the dividend, the
Directors have determined that acquisition-related amortisation will be added back to net profit
after tax before determining the dividend.

Description and Review of Revenue Streams
SDL Services
SDL Services predominantly provides mail house operations to high-volume postal mail users, mainly
those in the business-to-consumer sector. DéjarMail has expanded the market for SDL’s print and
post service down to the SME (small to medium enterprise) sector although the Company does not
sell directly to SMEs but reaches this market through channel partners.
SDL Services operates leased, high-speed digital colour and monochrome printers. In addition to
digital printing, Services also provides the usual ancillary document handling operations such as
automated envelope inserting and flowrap.
Services revenue also includes a variety of outsourced functions or components such as postage,
offset printing, freight, paper and envelopes. The Company has an access agreement with NZ Post
which provides bulk mail discounts off NZ Post’s retail rates, subject to SDL meeting minimum
volumes requirements over a twelve month period. SDL continues to exceed NZ Post’s minimum
volumes under this agreement. The profit margins on many of these outsourced components,
especially postage, are slim.
With general mail volumes continuing to decline, SDL’s FY2018 mail lodgement volumes fell 8.6%
although the Company’s digital print volumes rose 7.6% as a result of new business wins offsetting
declining volumes from existing clients. The differing growth outcome for mail lodgement versus
print volumes is accounted for by two effects. The first is that not all SDL’s digital print volumes are
related to mail, and secondly, changes in the average number of printed sheets of paper per mail
item means that print and mail volumes are not one-to-one correlated. Note that part of the decline
in physical mail volumes is offset by an increase in email volumes processed by SDL; these rose by
just over 30% during FY2018. SDL has continued to increase its market share of declining mail
volumes albeit at a lower rate of gain than in prior years. Note that the growth in Outsourced
Services revenue in the following table is a combination of both very low margin postage and the
outsourced printing for DéjarMail volumes in the UK.

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SDL Services Revenue Breakdown
(all figures $000)
FY2018 FY2017 Percentage
Change
Digital Printing and Document Handling 6,773 6,712 0.9%
Outsourced Services 9,907 8,213 20.6%
Total Services Revenue 16,680 14,925 11.8%


Growth in digital printing was largely the result of adding new business and several non-mailing
digital print clients. Last year’s result commentary noted one of the Company’s major customers
had rationalised its print output during FY2017, and SDL’s FY2018 saw the full annualised effect of
that change.
The Directors remain cautious about acquisitions and will only proceed on the basis that any
transaction is expected to be value adding for shareholders, and with manageable financial and
operational risk profiles. While SDL’s net cash position provides financial capacity for further
acquisitions, the Company is conscious of first ensuring the two recent acquisitions are well
integrated and adding value.
SDL Software & Technology
Digital tools and the ensuing digital transformation mean communication channels and the customer
engagement model in most businesses has needed to adapt and become nimble and personalised.
Organisations increasingly need to employ more “pull” marketing tactics, drawing people in to their
brands with interesting, informative and engaging content. Communication channels are no longer
“one size fits all”; customers should receive messaging through an omni-channel or multi-media
approach. SDL treats every form of communication – whether a customer email, an invoice or
account statement, or a piece of marketing collateral – as a means to enrich and deepen the
personalised relationships that our customers have with their customers.
The Company’s history in mailhouse and fulfilment means we fully understand the importance of
data accuracy, timely delivery, and cost efficiency. The ongoing investment in software and
technology demonstrates the SDL’s commitment to making the most of the digital transformation
opportunities available to our clients.
SDL Software has developed four software engines that are used as required to develop customer
solutions. The acquisition of DTP in late FY2018 added further software capability with that
company’s Jupiter product and the Scantech acquisition has added scanning workflow software:
1. Déjar
Déjar is a digital archival system that provides the ability to efficiently store and retrieve
electronic documents created from most formatting tools. Déjar allows users to exactly
reproduce the original document and access these via a browser over the local network or
via the Internet. The reproduced document can be printed, faxed or emailed and Déjar’s

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security and history features ensure every document created and subsequent access event is
recorded by User ID and date/time stamp.
2. Composer
Composer is SDL’s electronic document creation software. It is flexible and allows
customised documents to be built on the fly, based on information retrieved from
databases. Based on templates it automatically creates templates, documents and letters
with dynamic, customised content, formatted to each customer’s requirements. Composer
allows companies to easily standardise corporate documentation formats for all users,
including regional and legal variations. Templates, documents, emails, letters and
newsletters created by Composer are automated, ready to archive, print, publish online, or
electronically distribute to customers in one step.
3. Bremy
Bremy is an integrated, multi-channel publishing and distribution solution for businesses
across a broad spectrum of industries. It manages the work flow of digital assets, from
document creation and revision, to final email or print-ready files and distribution through
multiple channels, including print, email, web, digital signage and mobile. It helps
streamline and provides integrity to document proofing and integrates with data sources to
produce complex documents such as online or physical catalogues. It also has a Campaign
Manager module to assist companies in creating and managing specific advertising
programmes.
4. DéjarMail
DéjarMail is a web browser-based desktop mail management solution which allows
customers to route mail correspondence, by file transfer or web browser portal (Post On
Demand), to SDL or any other service provider for printing and delivery via post or any other
medium. This delivers costs savings for smaller businesses and for larger companies’ ad hoc
mail.
5. Jupiter
Jupiter, acquired as part of the DTP acquisition, is a global print and mail solution that
benefits Postal Administrations, senders and recipients, all via a “Managed Print and Mail
Solution”. Jupiter provides a technology platform which links together customer
communication origin points such as ERP, transactional and marketing output with
production and fulfilment on a globally distributed basis. Closely integrated with over 300
service providers globally, customers can use a highly flexible web service API to achieve
simultaneous concurrent fulfilment across five continents, all while retaining visibility and
control of the process via an intuitive and mobile friendly, web portal.
The scope for integration of the SDL product set with Jupiter’s global fulfilment network
opens the door to expansion of the markets that the range of SDL solutions can apply to.
6. Scantech software

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Scantech’s suite of software solutions include scanning applications to digitise physical
documents, automated extraction of data from documents (both physical and digital)
including workflows for the processing of this data and the automation of business
processes such as accounts payable and accounts receivable. These are also integrated into
SDL products, such as Déjar for archival and retrieval.
Software & Technology revenue is earned from three sources.
SaaS (Software as a Service) is an alternative to the traditional, now largely defunct, licensing of
software. Under SaaS, rather than pay an upfront fee, customers opt to run SDL’s software on a pay-
as-you-go model, typically by way of a per-document or per-electronic transaction charge. Under
this model, SDL will usually host the software (using third party hosting infrastructure, such as
Amazon Web Services) and related data on behalf of the client. While SDL forgoes the benefit of any
large up-front licence revenue, the SaaS approach does build an annuity revenue base that then
generates value over a longer term. The trend in recent years has been for customers to prefer SaaS
rather than acquiring a software licence, to the point where the Company no longer expects to sell
licences.
Secondly, the company offers bespoke software development services where this is related to a
customer using SDL’s software. An example is a customer requiring a front end, web-based access
portal to allow its clients to access the underlying data being stored or managed by SDL’s software.
The third is the provision of programming, consulting, business analysis and design services that help
clients to manage essential and marketing communications both by mail and electronic transfer.
Software encompasses all international software revenue and all revenue from all of our software
products and services. It also includes Déjar revenue in New Zealand for digital document archival
and management for SDL Services’ customers. Note that a significant part of the revenue from
DéjarMail is generated in SDL Services from the printing and postage component of the service.
In addition to New Zealand and Australia, both Déjar and Composer are sold internationally, mainly
in the UK and Europe. Bremy is predominantly a New Zealand product, with several Australian and
UK customers and the Company sees potential for ongoing and potentially strong growth in the UK,
albeit from a low base. DéjarMail is continuing to see solid growth in the UK and given the early-
stage client base in that region we expect this will be a secular growth trend that will run for a
number of years. The roll out of Bremy to UK dental practices commenced during FY2017, although
there was a period of additional development required, which constrained growth during the year.
We continue to expect growth from Bremy, although as with DéjarMail, the speed of the take-up
rate and eventual penetration levels is difficult to assess.
SDL sees a general trend for organisations to internally generate and self-store PDF files; this is likely
to reduce demand for the Company’s Déjar archival product over time.
In the UK, SDL has added additional sales and support personnel, as well as staff in Europe during
FY2017 and incurred the full annualised impact on profitability from these costs during FY2018.
Additional UK-based sales staff are currently being added.
Software & Technology generated revenue of $6.05 million in FY2018, an increase of 19.5% on the
prior year’s revenue of $5.07 million (and an acceleration of growth from 13.9% the prior year),

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largely the result of DéjarMail growth in the UK. There were no large, one-off licence revenues
achieved, with some software development work undertaken and SaaS revenues continuing to build.
Scandinavian postal operator, Post Nord’s digital solutions arm, Stralfors, was added as a new
customer in the second half, generating FY2018 revenue from setup and implementation, plus some
software customisation.

Financial Performance
Revenue growth in FY2018 was generated by both Software and Technology, and Outsourced
Services, both of which grew around 20% year-on-year, while Digital Imaging and Document
Handling remained largely flat. Outsourced Services revenue gains are predominantly the effect of
printing for DéjarMail volumes in the UK. Postage margins remain very low and this is unlikely to
change as the wholesale rates and hence margin that New Zealand Post is able to offer is regulated
by the Postal Network Access Committee, although changes to NZ Post’s rebate requirements will
negatively affect FY2019 margins.
Summary Financial Performance
(all figures $000)
FY2018 FY2017 Percentage
Change
Total Revenue 22,732 19,991 13.7%
Less: Cost of Goods Sold 14,315 12,274 16.6%
Gross Margin 8,417 7,717 9.1%
Gross Margin (%) 37.0% 38.6%

Less: Selling, General & Admin 6,144 5,630 9.1%
EBITDA 2,273 2,087 8.9%
EBITDA margin (%) 10.0% 10.4%

Depreciation 208 208 n.m.
Amortisation 161 78 n.m.

EBIT 1,904 1,801 5.7%

Net Interest (5) (1) n.m.
Income Tax 577 492 17.3%.
Net Profit after Tax 1,332 1,310 1.7%
Tax rate 30.2% 27.3%

FY2018 earnings were reduced by the Company’s decision to make two acquisitions: Scantech, and
DTP. The following table highlights the main costs involved from the acquisitions and provides a like-
for-like comparison to SDL’s results in the absence of these acquisitions.

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Adjusted Financial Performance
(all figures $000)
FY2018 FY2017 Percentage
Change
Reported Net Profit After Taxation 1,332 1,310 1.7%
Acquisition-related costs (net of any tax):
Acquisition costs (e.g. legal, due diligence) 118
Post-purchase trading losses (ex-amortisation) 58
Amortisation (of acquired intangibles) 49

SDL like-for-like profit 1,557 1,310 18.8%

Earnings per Share like-for-like basis (cents) 10.69 9.32 14.7%
Dividend per Share (cents) 7.50 6.75 11.1%

Dividend Payout ratio like-for-like basis 70.1% 72.4%

The effect of the acquisition drag on SDL’s profitability was compounded by the fact that DTP losses
are quarantined in a US entity for tax purposes and thus not available to be offset against profits in
other areas of SDL. Also, amortisation of acquired intangibles (other than a portion of the software)
is not deductible for tax purposes. These factors pushed up the Company’s headline tax rate to
30.2% for the year and 32.2% in 2H (these factors will continue in FY2019).
The second half remains the seasonally the quieter half of the year, especially in New Zealand,
although growth in software (and directly associated Outsourced Services) revenue is now beginning
to produce a more balanced profit split.
The FY2018 result includes a pre-tax benefit of $0.23 million from the Company’s market
development agreement with NZ Trade and Enterprise (“NZTE”). This agreement expired in June
2018. SDL intends applying for further NZTE market development support for its US expansion
efforts through DTP, however, this application is not able to be made prior to January 2019 and
there is no certainty the Company’s application will be successful.
The change in mix of revenue towards a greater component of low margin, outsourced services is
causing SDL’s percentage Gross Margin to compress, although the dollar Gross Margin is continuing
to grow. This trend is likely to persist as DéjarMail’s offshore revenue grows at a faster rate than the
rest of the Company’s business. Nevertheless, despite the percentage Gross Margin compression,
SDL’s ongoing focus on cost control saw the Company’s EBITDA margin decline only slightly, to
10.0%. Part of the reduction is the deliberate and ongoing addition to sales and support staff in
offshore markets, particularly the UK, and during FY2019 probably also in the US.
The following table highlights first and second half performance for the last two financial years.
Note that 2H FY2018 EBITDA contains approximately $0.15 million of costs and operating losses
related to the two acquisitions made late in FY2018 (the positive EBITDA generated by Scantech was
well outweighed by the EBITDA loss from DTP).

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SDL Half Financial Years
(all figures $000)
2H
FY2018
2H
FY2017
Percent
Change
1H
FY2018
1H
FY2017
Percent
Change
Total Revenue 11,440 9,804 16.7% 11,292 10,187 10.8%

EBITDA 949 1,009 -5.9% 1,324 1,078 22.8%
EBITDA margin 8.3% 10.3% 11.7% 10.6%

Tax rate 32.2% 29.9% 28.9% 24.9%


Balance Sheet, Liquidity and Debt
Capital expenditure in FY2018 was $0.188 million, a drop of around 9% on the prior year ($0.206
million). The capex spend mainly related to IT equipment, a specialised booklet-making piece of
print finishing equipment for which we see strong customer demand, and upgrading SDL’s
accounting and print job management systems.
The Company’s net cash (i.e. cash net of interest bearing debt) position declined marginally, by $0.12
million or 6.0%, to $1.96 million, with the reduction a result of SDL investing $0.712 million in
acquiring Scantech and DTP. Further payments for these two acquisitions are likely in FY2019 under
vendor earnout arrangements.
At balance date the Company’s sole remaining bank facility was an unused overdraft arrangement
from ANZ Bank with a $200,000 limit.

Selected Balance Sheet and Cashflow Figures
(all figures $000)
FY2018 FY2017 Change
Net Bank Cash/(Debt & Borrowings) 1,956 2,080 (124)
Non-Current Assets 2,871 2,008 863
Net Other Liabilities (816) (569) (247)
Net Assets 4,011 3,519 492

Cashflow from Trading 1,677 1,599 78
Movement in Working Capital (55) 82 (137)
Cash Inflow from Operations 1,622 1,681 (59)

Cash dividends paid 1,039 808 231


Net Assets includes goodwill related to the original purchases of the software products Déjar and
Bremy. Bremy accounts for around three quarters of the $1.06 million carrying value of goodwill.
An impairment test is conducted against the carrying value of these assets each year and the
Directors believe the current value of these products remains comfortably in excess of their carrying
values.
The acquisitions of Scantech and DTP have resulted in additional intangible assets of $1.047 million,
mainly related to the value of software IP plus customer contracts these companies have in place.
Unlike goodwill, these intangibles are required to be amortised under accounting rules and the

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directors have determined they should be written off over periods of four to five years depending on
the type of intangible asset. This will mean an additional, non-cash, amortisation charge of around
$0.23 million to the Income Statement for the next four years.
While SDL’s balance sheet shows a positive net-cash position, the Company is also carrying leases on
its premises and much of its printing and document handling equipment. The annual cost of rentals
and leases was $0.72 million in FY2018 ($0.69 million in FY2017) and represents off balance sheet
leverage. We note that in FY2020 the accounting standards relating to leases will change. Finance
leases will be capitalised and shown as a debt liability, increasing the amount of debt on the balance
sheet, as well as altering the Income Statement by mandating that part of the lease payment be
accounted for as a financing (i.e. interest cost) charge.
Excluding the net cash balance from SDL’s working capital, the Company currently operates with a
slightly negative working capital balance. The Company adopts a positive view to this aspect of its
balance sheet. It means SDL can generally continue to grow revenue without particular requirement
to fund any additional working capital needs. Note that SDL’s Other Current Liabilities figure
included $0.335 million as a provision for the earnout liability in relation to Scantech and DTP. To
the extent that the actual earnout varies from this provision, the difference will affect the FY2019
Income Statement (and will be disclosed a separate item).

Taxation and Dividends
Aside from minor timing issues and non-deductible expenses, the Company pays full New Zealand
tax on locally generated earnings. SDL completely utilised its remaining UK tax losses during the year
and is now paying UK tax. The recently acquired DTP business in the US is currently making losses.
These are effectively ring fenced within the US and SDL is not able to group them to offset other
profits. Until the Company is able to improve trading performance of DTP it will therefore show an
abnormally high tax rate although this position will reverse if SDL is able to return DTP to profitability
and utilise any US tax losses that are then available (note that the losses may possibly be recognised
earlier for accounting purposes but this will not affect the cash tax position). Further, a portion
(relating to customer contracts and some of the acquired software) of amortisation of acquired
intangibles is not tax deductible and this will also bias the reported tax rate upwards until these are
fully written down.
SDL only intends to pay dividends to the extent that it can fully impute them and also subject to SDL
not experiencing any one-off requirements for abnormal capital expenditure or any significant
acquisition activity.

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Earnings and Dividends per Share FY2018 FY2017 Percentage
Change
Shares on Issue (‘000) 14,560 14,059 3.6%

Earnings per Share (cents) 9.15 9.32 -1.8%
Adjusted Earnings per Share (cents) (a) 10.69 9.32 14.7%

Dividend per Share (cents) 7.50 6.75 11.1%
Dividend Proportion Imputed 100.0% 100.0%

Dividend Payout ratio 82.0% 72.4%
Dividend Payout ratio on Adjusted EPS 70.1%

(a) Adjusted earnings per share is a non-GAAP accounting measure that is calculated by adding back the
costs and losses relating to SDL’s two recent acquisitions. It is provided to provide investors with a
more meaningful like-for-like comparison against the prior year earnings per share.

Shares on issue rose slightly (+3.6%) over FY2018, entirely the result of SDL staff exercising Employee
Share Option Programme (“ESOP”) options that were issued in 2014. The bulk of ESOP options have
been exercised with only 80,000 options now outstanding under this programme.
Operational Performance
The industry-wide decline in general mail volume is continuing and anecdotal industry comments
suggest that the rate of decline increased in FY2018. SDL’s mail volumes dropped 8.6%, partly
cushioned by some new business gain. The Company’s digital print volumes increased 7.6% on last
year. SDL’s print equipment has significant capacity, particularly from a high-speed, continuous
printer under the DMS agreement with FXNZ. The Company has progressively transitioning a greater
proportion of its print jobs from cut sheet printers onto the continuous printer as this provides
efficiency benefits. Any material growth in continuous print volume under the DMS agreement
would likely require a modest increase in the level of production staff and possibly some additional
document handling equipment.
New Zealand Postal Market
The domestic postal services market continues to evolve, and changes in 2018 are not positive for
physical mail volumes. Previously, in July 2015, NZ Post commenced the process of reducing the
number of delivery days per week for standard letter mail in major towns and cities to three days,
although it is continuing to provide six-day-per-week delivery for premium mail. Earlier in 2018, NZ
Post announced a substantial increase in the price of mail that took effect from 1 July 2018. The
price of a standard letter increased by 20 cents from $1.00 to $1.20, and bulk mail prices also
increased along with tighter conditions to achieve bulk pricing.
There are examples of one-off sizeable mail price increases overseas, including Australia, in recent
years. The experience has tended to result in a one-off step down in mail volumes, subsequently
followed by ongoing volume erosion then continuing from the lower base. SDL has no reason to
assume anything other than a similar experience is likely in New Zealand, with the main uncertainty

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around how quickly the Company’s customers react and begin the push to digitise more of their
communications.
These price changes by NZ Post may create opportunities for SDL as it may force some customers to
accelerate moves towards greater use of digital communications solutions. The Company tracks
how its major customers utilise print versus electronic delivery for transactional mail. FY2018 has
already seen a pick-up in the rate at which customers are switching to digital and we expect a
further, probably significant, step up in that rate during FY2019. SDL is well positioned to capitalise
on this, given its breadth of technology offerings with solutions for digitally communicating with and
servicing customers (these can also deliver significant communications and document creation cost
savings).
Nevertheless, if the Company’s customers opt in FY2019 to more rapidly switch towards greater
electronic communications, SDL will inevitably suffer margin loss from lower utilisation of its printing
assets and any revenue and margin gained from SDL Software & Technology will not be sufficient to
offset this decline.

Risk Factors
The physical mail market will continue to decline in volume with the probability of a one-off more
sizeable decline in FY2019 resulting from recent NZ Post price increases. This has several industry-
wide implications. First, excess printing capacity in the mail house physical print sector, already a
problem, will inevitably worsen. Secondly, increased competition for lower volumes may spill over
into pricing and margin pressure. The risk is partly mitigated by SDL’s ability to add value through its
technology offerings although excessive price discounting of printing services would affect
profitability across the entire industry and SDL would not be immune to this threat. Additionally,
pressure on marginal print operators is likely to cause industry rationalisation, although SDL may
benefit from being able to acquire distressed print volumes (without buying the associated print
assets).
SDL’s top five customers provided 40% of the Company’s revenue in FY2018 with the largest
customer accounting for 12% of revenue. Loss of one or more of those customers could cause
financial results to differ materially from those outlined in the FY2019 Outlook section below. This
risk is partly mitigated by having a number of these clients under contract, as well as the offset of
expecting revenue growth outside these clients, particularly from DéjarMail.
The Company’s software provides critical document management and storage functions for its
clients. SDL needs to ensure it continues to maintain adequate levels of software quality control.
SDL also regards IT and data security as a potential risk area and regularly reviews its IT and data
security arrangements.
The Company operates a single site facility, albeit with an offsite for data and server backup. The
Directors are conscious of the operational risk a single site implies for digital imaging operations.
SDL has investigated reciprocal disaster recovery (“DR”) plans with other printers, and the Company
has some capability with Fuji Xerox, however, in general, print capacity mismatches have meant
there are few possible solutions. SDL continues to explore DR options.

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The Company relies on several third party distributors to market and support its software products,
especially in international markets. There is no certainty that these arrangements will be successful
in meeting revenue expectations and SDL may be required to devote more time and funds to
support its existing international distribution structures.

Technology Innovation
SDL operates in both the old economy print/mail house business and the new economy document
management business. While there are many areas where printed mail is continuing to decline,
some elements (e.g. direct marketing) of print and mail remain reasonably resilient. Nevertheless,
SDL is continuing to innovate and develop its software offerings to ensure the Company is agnostic in
the communication channels it is able to offer its clients to communicate with their customers.
SDL has been progressively managing its portfolio of digital document software IP to ensure the
Company is capable of making this progressive transition towards the growing emphasis on digital
customer communications. This involves increasing internationalisation of SDL’s revenues, both
through software product development and acquisitions such as DTP, as well as the development of
channel partners to build distribution.

Share Trading Liquidity
The Directors are conscious that the Company’s shares trade infrequently and that this is likely to
result in higher than desired share price volatility and limited ability for investors to enter or exit a
holding. There are likely several factors behind this, but predominantly two main ones; the high
extent to which large blocks of SDL’s shares are held by parties who do not normally trade them,
reducing the effective free float, and the fact that SDL is listed on NZX’s secondary, NZAX, board.
There is no action the Company can take in respect of the first factor.
On the second factor, NZX has commenced a process to review and simplify its Listing Rules, and as
part of that is also looking to simplify its equity market structure and consolidate the NZAX and NXT
markets into a single NZSX Main Board. The NZX Listing Rule review is well advanced but is still
subject to FMA approval. Subject to timing of the approval of the new Rules, the window for the
Company to transition from NZAX to the main board should open in early 2019. With the caveat
that the Directors are yet to see and take advice on the updated Listing Rules, SDL intends to
transition to a NZSX Main Board listing as soon as practical in 2019 and then review liquidity to see if
further actions are warranted.

FY2019 Outlook
After a good result for FY2018, the Company is cautious for FY2019. The mail pricing actions by NZ
Post will inevitably mean volume and margin erosion in SDL’s print and mail house operations.
While there will be some offsetting volume switch into SDL’s digital revenues, the amount of dollar

14

margin achieved for a digital communication processed by SDL is significantly less than for a similar
print and mail communication.
Software revenues in the UK are continuing to increase and we expect this trend to continue in
FY2019. In Europe, Post Nord is expected to begin progressively utilising SDL’s technology, although
the rate of customer take up is uncertain at this stage and the FY2018 result benefitted from one-off
setup and customisation revenues for Post Nord. Furthermore, SDL has added additional support
and business development infrastructure in the UK and the market development cost subsidy
programme from NZTE expired at 30 June, meaning UK costs will show a sizeable net increase in
FY2019.
The acquisition of Scantech will make a positive addition to earnings and that business is currently
operating to expectations. However, the Scantech contribution will be partially offset by expected
losses from DTP in the US. DTP has a number of very significant customer opportunities, but even if
some of these are successfully closed, the lead times to fully implement and bring the customers on
board may mean that little benefit is gained in FY2019.
Lastly, the accounting rules around amortisation of acquisition intangibles mean that SDL will incur
an additional non-cash charge of around $0.205 million (after tax) per annum for the next four years.
The Directors have determined that the non-cash charge for amortisation related to acquired
intangibles will be ignored for the purposes of SDL’s dividend payout policy.
The combined effect of NZ Post price changes on margins, expiry of NZTE market development
contribution, intangibles amortisation and DTP losses are sufficiently large that it is only broadly
offset by the addition of Scantech earnings and Software & Technology growth in the UK and
Europe.
Consequently, SDL’s outlook for FY2019 is for a modest decline of around 5-10% in reported net
profit after tax. Note that this forecast includes the full year impact of amortising the intangible
assets that were acquired with Scantech and DTP and if these are excluded, then FY2019 earnings
are expected to show a low single digit percentage increase. The Company’s forecast does include
some moderate growth in new business assumptions and is subject to the usual risks that the print
and mail house market remain extremely competitive and in decline.

For further information, please contact:
John McMahon Nelson Siva
Chairman Director & Chief Executive Officer
+61-410-411 806 +64-21-415 027

---

Simplifying Business
Simplifying Business
Annual Report 2018

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ANNUAL
SHAREHOLDERS
MEETING
will be held at
10.30am
Wednesday 24 October 2018
in the
Jupiter Meeting Room
Solution Dynamics Limited
18 Canaveral Drive
Albany
Auckland
2018 KEY POINTS
Net Profit after Tax up 1.7% to
$1.33 million
l up 18.8% adjusted for impact of acquisitions
Dividend per share of 7.5 cents
(prior year 6.75 cents)
Revenue up 13.7% to $22.7 million
European revenue up 33.9% to

$4.0 million
EBITDA up 8.9% to $2.27 million
l up 17.2% adjusted for impact of acquisitions
Cash from operations flat at
$1.62 million
Net cash on hand down 6.0%

to $1.96 million
Two acquisitions late in the

financial year

Entered international Hybrid Mail
market and established presence

in USA
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CONTENTS
2018 Key Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Management Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Statement of Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Consolidated Financial Statements for the Year Ended 30 June 2018
> Consolidated Statement of Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
> Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
> Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
> Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
> Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
> Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Company Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

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MANAGEMENT DISCUSSION AND ANALYSIS
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Solution Dynamics Limited
FY2018 Result Overview
Solution Dynamics Limited (“SDL” or “Company”) has produced an audited net profit after tax of $1 .332 million
for FY2018 (growth of 1 .7%) . This profit includes costs and losses from acquisitions made late in the financial
year, which acted as a significant drag on the Company’s profit . A like-for-like comparison (backing out the loss
effect from acquisitions) against the prior year saw pleasing growth in net profit after tax of 18 .8% . Highlights of
the result are:
• revenue growth of 13 .7% to $22 .7 million, with revenue from the UK and Europe up $1 .0 million or 33 .9%
to $4 .0 million
• EBITDA growth of 8 .9% to $2 .27 million (growth was 17 .1% to $2 .44 million excluding the effects of
acquisition costs and losses)
• net cash on hand at 30 June balance date was $1 .96 million
• the Directors have declared a final, fully imputed dividend of 3 .50 cents per share (FY2017: 3 .25 cents),
taking the total dividend for FY2017 to 7 .50 cents per share (FY2017: 6 .75 cents), an increase of 11 .1%
In late FY2018, SDL acquired Auckland-based Scantech (scanning and scanning/workflow software) and US-
based DigitalToPrint, Inc . (“DTP”), which provides of a globally distributed print and mail solution .
Business Overview
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, outsourced services and
scanning); and
• Software & Technology .
Services includes digital print and mail house processing for mail items such as invoices, statements and
promotional material . These are then distributed through New Zealand Post’s (“NZ Post”) 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 revenue for Scantech is primarily included in Services (document handling
services), although consulting and software revenues that are related to Scantech’s software technology are
included in the Software & Technology revenue stream .
Software & Technology develops and markets SDL’s own software products related to a) multi-channel
marketing communications, which includes: a) digital asset management, communication templates and
campaign management, b) document archiving, c) document composition, d) desktop mail solutions, e)
scanning and scanning workflow, and f) international cross-border print-on-demand management software .
A range of further technology services are also offered relating to SDL’s own software and the management
of client data around the formatting, electronic output and archiving of customer communications . The US
business, DTP, acquired by SDL in May 2018 is wholly included in Software & Technology .
Despite the ongoing erosion of transactional mail volumes, the Directors believe that SDL’s key point of
difference is in offering integrated solutions incorporating both physical print and digital technology . Some
communications are better suited to print and will likely remain so for the foreseeable future . In other cases,
use of software technology such as DéjarMail (SDL’s desktop mail solution) can improve the handling efficiency,
management and cost of physical mail . The Company’s integrated range of print and software technologies
means it is able to offer a holistic and distribution channel/platform-agnostic approach to managing its
customers’ communications needs .
The Company operates from leased premises in Albany, Auckland .
Acquisitions
SDL made two acquisitions late in the financial year, Scantech in April 2018 and DTP in May 2018 .

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MANAGEMENT DISCUSSION AND ANALYSIS
Scantech is largely a “bolt-on” incremental transaction for the Company . SDL has offered scanning services
to its customers for some time and then subcontracted this work to Scantech and taken a small margin in the
process . Scantech has developed its own, in-house scanning workflow software, which means it is not reliant
on click-cost-based external software to manage its scanning . There are opportunities to sell Scantech’s
software in the UK and customer pilot projects are currently underway .
DTP is a riskier acquisition for SDL as it is currently unprofitable and is likely to remain so in the coming
financial year . In that sense, the purchase price for SDL is a combination of what has been paid (plus likely
vendor earn-out) plus the cost to fund near-term losses . However, DTP opens two new opportunities for SDL;
cross border printing and a toe-hold into the US market . Cross-border printing is where a company needs to
print and mail for offshore markets . Companies have two options here: either print-and-mail from their home
country (expensive with international mail rates) or print in foreign countries (cheaper, but problematic around
the logistics of managing a network of foreign printers, many of whom will have differing print composition
requirements) . DTP’s software and network of printer relationships enables cross border printing and SDL
was aware from discussions with existing UK customers that there was a market need for this functionality .
Stepping – carefully – into the US market is an opportunity, but one that will require additional sales and
technical support overhead over time . The Company is already bidding on a sizeable pipeline of work and the
scale of potential revenue from individual opportunities is large, although we are under no illusions about the
difficulty of succeeding in this market . Our initial observation is that the switch to electronic in the US, while
underway, appears much slower and at a far earlier stage than in New Zealand .
Both acquisitions are structured with cash upfront payments and subsequent vendor earn-outs for reaching
profit targets . Note that accounting rules now require intangibles to be allocated to items such as intellectual
property and the value of customer contracts, rather than goodwill . Unlike goodwill, which remains on the
balance sheet subject to annual impairment testing, the intangibles must be written off by amortisation
through the Income Statement . SDL is opting to write down acquired intangibles over a relatively short four
to five year period . This means the Company will incur a non-cash, amortisation charge against profit of
around $0 .23 million each year for the next four years . Furthermore, a portion (relating to customer contracts
and some of the acquired software) of this charge is not tax deductible . For the purposes of calculating the
dividend, the Directors have determined that acquisition-related amortisation will be added back to net profit
after tax before determining the dividend .
Description and Review of Revenue Streams
SDL Services
SDL Services predominantly provides mail house operations to high-volume postal mail users, mainly those in
the business-to-consumer sector . DéjarMail has expanded the market for SDL’s print and post service down to
the SME (small to medium enterprise) sector although the Company does not sell directly to SMEs but reaches
this market through channel partners .
SDL Services operates leased, high-speed digital colour and monochrome printers . In addition to digital
printing, Services also provides the usual ancillary document handling operations such as automated envelope
inserting and flowrap .
Services revenue also includes a variety of outsourced functions or components such as postage, offset
printing, freight, paper and envelopes . The Company has an access agreement with NZ Post which provides
bulk mail discounts off NZ Post’s retail rates, subject to SDL meeting minimum volumes requirements over a
twelve month period . SDL continues to exceed NZ Post’s minimum volumes under this agreement . The profit
margins on many of these outsourced components, especially postage, are slim .
With general mail volumes continuing to decline, SDL’s FY2018 mail lodgement volumes fell 8 .6% although
the Company’s digital print volumes rose 7 .6% as a result of new business wins offsetting declining volumes
from existing clients . The differing growth outcome for mail lodgement versus print volumes is accounted for
by two effects . The first is that not all SDL’s digital print volumes are related to mail, and secondly, changes
in the average number of printed sheets of paper per mail item means that print and mail volumes are not
one-to-one correlated . Note that part of the decline in physical mail volumes is offset by an increase in email
volumes processed by SDL; these rose by just over 30% during FY2018 . SDL has continued to increase its
market share of declining mail volumes albeit at a lower rate of gain than in prior years . Note that the growth in
Outsourced Services revenue in the following table is a combination of both very low margin postage and the
outsourced printing for DéjarMail volumes in the UK .

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MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
Solution Dynamics Limited
Déjar is a digital archival system that provides
the ability to efficiently store and retrieve
electronic documents created from most
formatting tools . Déjar allows users to exactly
reproduce the original document and access
these via a browser over the local network or
via the Internet . The reproduced document
can be printed, faxed or emailed and Déjar’s
security and history features ensure every
document created and subsequent access event
is recorded by User ID and date/time stamp .
Composer is SDL’s electronic document
creation software . It is flexible and allows
customised documents to be built on the fly,
based on information retrieved from databases .
Based on templates it automatically creates
templates, documents and letters with dynamic,
customised content, formatted to each
customer’s requirements . Composer allows
companies to easily standardise corporate
documentation formats for all users, including
regional and legal variations . Templates,
documents, emails, letters and newsletters
created by Composer are automated, ready to
archive, print, publish online, or electronically
distribute to customers in one step .
SDL Services Revenue Breakdown Percentage
(all figures $000) FY2018 FY2017 Change
Digital Printing and Document Handling 6,773 6,712 0 .9%
Outsourced Services 9,907 8,213 20 .6%
Total Services Revenue 16,680 14,925 11.8%

Growth in digital printing was largely the result of adding new business and several non-mailing digital print
clients . Last year’s result commentary noted one of the Company’s major customers had rationalised its print
output during FY2017, and SDL’s FY2018 saw the full annualised effect of that change .
The Directors remain cautious about acquisitions and will only proceed on the basis that any transaction is
expected to be value adding for shareholders, and with manageable financial and operational risk profiles .
While SDL’s net cash position provides financial capacity for further acquisitions, the Company is conscious of
first ensuring the two recent acquisitions are well integrated and adding value .
SDL Software & Technology
Digital tools and the ensuing digital transformation mean communication channels and the customer
engagement model in most businesses has needed to adapt and become nimble and personalised .
Organisations increasingly need to employ more “pull” marketing tactics, drawing people in to their brands
with interesting, informative and engaging content . Communication channels are no longer “one size fits all”;
customers should receive messaging through an omni-channel or multi-media approach . SDL treats every
form of communication – whether a customer email, an invoice or account statement, or a piece of marketing
collateral – as a means to enrich and deepen the personalised relationships that our customers have with their
customers .
The Company’s history in mailhouse and fulfilment means we fully understand the importance of data accuracy,
timely delivery, and cost efficiency . The ongoing investment in software and technology demonstrates the SDL’s
commitment to making the most of the digital transformation opportunities available to our clients .
SDL Software has developed four software engines that are used as required to develop customer solutions .
The acquisition of DTP in late FY2018 added further software capability with that company’s Jupiter product
and the Scantech acquisition has added scanning workflow software:

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MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
Software & Technology revenue is earned from three sources .
SaaS (Software as a Service) is an alternative to the traditional, now largely defunct, licensing of software .
Under SaaS, rather than pay an upfront fee, customers opt to run SDL’s software on a pay-as-you-go model,
typically by way of a per-document or per-electronic transaction charge . Under this model, SDL will usually
host the software (using third party hosting infrastructure, such as Amazon Web Services) and related data on
behalf of the client . While SDL forgoes the benefit of any large up-front licence revenue, the SaaS approach
does build an annuity revenue base that then generates value over a longer term . The trend in recent years has
been for customers to prefer SaaS rather than acquiring a software licence, to the point where the Company no
longer expects to sell licences .
Secondly, the company offers bespoke software development services where this is related to a customer
using SDL’s software . An example is a customer requiring a front end, web-based access portal to allow its
clients to access the underlying data being stored or managed by SDL’s software .
Bremy is an integrated, multi-channel publishing
and distribution solution for businesses across
a broad spectrum of industries . It manages
the work flow of digital assets, from document
creation and revision, to final email or print-
ready files and distribution through multiple
channels, including print, email, web, digital
signage and mobile . It helps streamline and
provides integrity to document proofing and
integrates with data sources to produce
complex documents such as online or physical
catalogues . It also has a Campaign Manager
module to assist companies in creating and
managing specific advertising programmes .
DéjarMail is a web browser-based desktop mail
management solution which allows customers
to route mail correspondence, by file transfer
or web browser portal (Post On Demand), to
SDL or any other service provider for printing
and delivery via post or any other medium . This
delivers costs savings for smaller businesses
and for larger companies’ ad hoc mail .
Jupiter, acquired as part of the DTP acquisition,
is a global print and mail solution that benefits
Postal Administrations, senders and recipients,
all via a “Managed Print and Mail Solution” .
Jupiter provides a technology platform which
links together customer communication origin
points such as ERP, transactional and marketing
output with production and fulfilment on a
globally distributed basis . Closely integrated with
over 300 service providers globally, customers
can use a highly flexible web service API to
achieve simultaneous concurrent fulfilment
across five continents, all while retaining visibility
and control of the process via an intuitive and
mobile friendly, web portal .
The scope for integration of the SDL product set
with Jupiter’s global fulfilment network opens the
door to expansion of the markets that the range
of SDL solutions can apply to .
Scantech Software; Scantech’s suite of
software solutions include scanning applications
to digitise physical documents, automated
extraction of data from documents (both
physical and digital) including workflows for the
processing of this data and the automation of
business processes such as accounts payable
and accounts receivable . These are also
integrated into SDL products, such as Déjar for
archival and retrieval .
Jupiter

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MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
Solution Dynamics Limited
The third is the provision of programming, consulting, business analysis and design services that help clients to
manage essential and marketing communications both by mail and electronic transfer .
Software encompasses all international software revenue and all revenue from all of our software products and
services . It also includes Déjar revenue in New Zealand for digital document archival and management for SDL
Services’ customers . Note that a significant part of the revenue from DéjarMail is generated in SDL Services
from the printing and postage component of the service .
In addition to New Zealand and Australia, both Déjar and Composer are sold internationally, mainly in the
UK and Europe . Bremy is predominantly a New Zealand product, with several Australian and UK customers
and the Company sees potential for ongoing and potentially strong growth in the UK, albeit from a low base .
DéjarMail is continuing to see solid growth in the UK and given the early-stage client base in that region we
expect this will be a secular growth trend that will run for a number of years . The roll out of Bremy to UK dental
practices commenced during FY2017, although there was a period of additional development required, which
constrained growth during the year . We continue to expect growth from Bremy, although as with DéjarMail, the
speed of the take-up rate and eventual penetration levels is difficult to assess .
SDL sees a general trend for organisations to internally generate and self-store PDF files; this is likely to reduce
demand for the Company’s Déjar archival product over time .
In the UK, SDL has added additional sales and support personnel, as well as staff in Europe during FY2017 and
incurred the full annualised impact on profitability from these costs during FY2018 . Additional UK-based sales
staff are currently being added .
Software & Technology generated revenue of $6 .05 million in FY2018, an increase of 19 .5% on the prior
year’s revenue of $5 .07 million (and an acceleration of growth from 13 .9% the prior year), largely the result
of DéjarMail growth in the UK . There were no large, one-off licence revenues achieved, with some software
development work undertaken and SaaS revenues continuing to build . Scandinavian postal operator, Post
Nord’s digital solutions arm, Stralfors, was added as a new customer in the second half, generating FY2018
revenue from setup and implementation, plus some software customisation .
Financial Performance
Revenue growth in FY2018 was generated by both Software and Technology, and Outsourced Services, both
of which grew around 20% year-on-year, while Digital Imaging and Document Handling remained largely flat .
Outsourced Services revenue gains are predominantly the effect of printing for DéjarMail volumes in the UK .
Postage margins remain very low and this is unlikely to change as the wholesale rates and hence margin that
New Zealand Post is able to offer is regulated by the Postal Network Access Committee, although changes to
NZ Post’s rebate requirements will negatively affect FY2019 margins .
Summary Financial Performance Percentage
(all figures $000) FY2018 FY2017 Change
Total Revenue 22,732 19,991 13 .7%
Less: Cost of Goods Sold 14,315 12,274 16 .6%
Gross Margin 8,417 7,717 9.1%
Gross Margin (%) 37 .0% 38 .6%
Less: Selling, General & Admin 6,144 5,630 9 .1%
EBITDA 2,273 2,087 8.9%
EBITDA margin (%) 10 .0% 10 .4%
Depreciation 208 208 n .m .
Amortisation 161 78 n .m .
EBIT 1,904 1,801 5.7%
Net Interest (5) (1) n .m .
Income Tax 577 492 17 .3% .
Net Profit after Tax 1,332 1,310 1.7%
Tax rate 30 .2% 27 .3%

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MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
FY2018 earnings were reduced by the Company’s decision to make two acquisitions: Scantech, and DTP . The
following table highlights the main costs involved from the acquisitions and provides a like-for-like comparison
to SDL’s results in the absence of these acquisitions .
Adjusted Financial Performance
(all figures $000) FY2018 FY2017 Change
Reported Net Profit After Taxation 1,332 1,310 1 .7%
Acquisition-related costs (net of any tax):
Acquisition costs (e .g . legal, due diligence) 118
Post-purchase trading losses (ex-amortisation) 58
Amortisation (of acquired intangibles) 49
SDL like-for-like profit 1,557 1,310 18.8%
Earnings per Share like-for-like basis (cents) 10 .69 9 .32 14 .7%
Dividend per Share (cents) 7 .50 6 .75 11 .1%
Dividend Payout ratio like-for-like basis 70 .1% 72 .4%
The effect of the acquisition drag on SDL’s profitability was compounded by the fact that DTP losses are
quarantined in a US entity for tax purposes and thus not available to be offset against profits in other areas of
SDL . Also, amortisation of acquired intangibles (other than a portion of the software) is not deductible for tax
purposes . These factors pushed up the Company’s headline tax rate to 30 .2% for the year and 32 .2% in 2H
(these factors will continue in FY2019) .
The second half remains the seasonally the quieter half of the year, especially in New Zealand, although
growth in software (and directly associated Outsourced Services) revenue is now beginning to produce a more
balanced profit split .
The FY2018 result includes a pre-tax benefit of $0 .23 million from the Company’s market development
agreement with NZ Trade and Enterprise (“NZTE”) . This agreement expired in June 2018 . SDL intends
applying for further NZTE market development support for its US expansion efforts through DTP, however, this
application is not able to be made prior to January 2019 and there is no certainty the Company’s application
will be successful .
The change in mix of revenue towards a greater component of low margin, outsourced services is causing
SDL’s percentage Gross Margin to compress, although the dollar Gross Margin is continuing to grow . This
trend is likely to persist as DéjarMail’s offshore revenue grows at a faster rate than the rest of the Company’s
business . Nevertheless, despite the percentage Gross Margin compression, SDL’s ongoing focus on cost
control saw the Company’s EBITDA margin decline only slightly, to 10 .0% . Part of the reduction is the
deliberate and ongoing addition to sales and support staff in offshore markets, particularly the UK, and during
FY2019 probably also in the US .
The following table highlights first and second half performance for the last two financial years . Note that
2H FY2018 EBITDA contains approximately $0 .15 million of costs and operating losses related to the two
acquisitions made late in FY2018 (the positive EBITDA generated by Scantech was well outweighed by the
EBITDA loss from DTP) .
SDL Half Financial Years
(all figures $000) 2H 2H Percent 1H 1H Percent
FY2018 FY2017 Change FY2018 FY2017 Change
Total Revenue 11,440 9,804 16 .7% 11,292 10,187 10 .8%
EBITDA 949 1,009 -5 .9% 1,324 1,078 22 .8%
EBITDA margin 8 .3% 10 .3% 11 .7% 10 .6%

Tax rate 32 .2% 29 .9% 28 .9% 24 .9%

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MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
Solution Dynamics Limited
Balance Sheet, Liquidity and Debt
Capital expenditure in FY2018 was $0 .188 million, a drop of around 9% on the prior year ($0 .206 million) . The
capex spend mainly related to IT equipment, a specialised booklet-making piece of print finishing equipment
for which we see strong customer demand, and upgrading SDL’s accounting and print job management
systems .
The Company’s net cash (i .e . cash net of interest bearing debt) position declined marginally, by $0 .12 million
or 6 .0%, to $1 .96 million, with the reduction a result of SDL investing $0 .712 million in acquiring Scantech and
DTP . Further payments for these two acquisitions are likely in FY2019 under vendor earnout arrangements .
At balance date the Company’s sole remaining bank facility was an unused overdraft arrangement from ANZ
Bank with a $200,000 limit .
Selected Balance Sheet and Cashflow Figures
(all figures $000) FY2018 FY2017 Change
Net Bank Cash/(Debt & Borrowings) 1,956 2,080 (124)
Non-Current Assets 2,871 2,008 863
Net Other Liabilities (816) (569) (247)
Net Assets 4,011 3,519 492
Cashflow from Trading 1,677 1,599 78
Movement in Working Capital (55) 82 (137)
Cash Inflow from Operations 1,622 1,681 (59)
Cash dividends paid 1,039 808 231

Net Assets includes goodwill related to the original purchases of the software products Déjar and Bremy .
Bremy accounts for around three quarters of the $1 .06 million carrying value of goodwill . An impairment test is
conducted against the carrying value of these assets each year and the Directors believe the current value of
these products remains comfortably in excess of their carrying values .
The acquisitions of Scantech and DTP have resulted in additional intangible assets of $1 .047 million, mainly
related to the value of software IP plus customer contracts these companies have in place . Unlike goodwill,
these intangibles are required to be amortised under accounting rules and the directors have determined they
should be written off over periods of four to five years depending on the type of intangible asset . This will mean
an additional, non-cash, amortisation charge of around $0 .23 million to the Income Statement for the next four
years .
While SDL’s balance sheet shows a positive net-cash position, the Company is also carrying leases on its
premises and much of its printing and document handling equipment . The annual cost of rentals and leases
was $0 .72 million in FY2018 ($0 .69 million in FY2017) and represents off balance sheet leverage . We note
that in FY2020 the accounting standards relating to leases will change . Finance leases will be capitalised and
shown as a debt liability, increasing the amount of debt on the balance sheet, as well as altering the Income
Statement by mandating that part of the lease payment be accounted for as a financing (i .e . interest cost)
charge .
Excluding the net cash balance from SDL’s working capital, the Company currently operates with a slightly
negative working capital balance . The Company adopts a positive view to this aspect of its balance sheet .
It means SDL can generally continue to grow revenue without particular requirement to fund any additional
working capital needs . Note that SDL’s Other Current Liabilities figure included $0 .335 million as a provision
for the earnout liability in relation to Scantech and DTP . To the extent that the actual earnout varies from this
provision, the difference will affect the FY2019 Income Statement (and will be disclosed a separate item) .

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MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
Taxation and Dividends
Aside from minor timing issues and non-deductible expenses, the Company pays full New Zealand tax on
locally generated earnings . SDL completely utilised its remaining UK tax losses during the year and is now
paying UK tax . The recently acquired DTP business in the US is currently making losses . These are effectively
ring fenced within the US and SDL is not able to group them to offset other profits . Until the Company is able
to improve trading performance of DTP it will therefore show an abnormally high tax rate although this position
will reverse if SDL is able to return DTP to profitability and utilise any US tax losses that are then available (note
that the losses may possibly be recognised earlier for accounting purposes, but this will not affect the cash tax
position) . Further, a portion (relating to customer contracts and some of the acquired software) of amortisation
of acquired intangibles is not tax deductible and this will also bias the reported tax rate upwards until these are
fully written down .
SDL only intends to pay dividends to the extent that it can fully impute them and also subject to SDL not
experiencing any one-off requirements for abnormal capital expenditure or any significant acquisition activity .
Percentage
Earnings and Dividends per Share FY2018 FY2017 Change
Shares on Issue (‘000) 14,560 14,059 3 .6%
Earnings per Share (cents) 9 .15 9 .32 -1 .8%
Adjusted Earnings per Share (cents) (a) 10 .69 9 .32 14 .7%
Dividend per Share (cents) 7 .50 6 .75 11 .1%
Dividend Proportion Imputed 100 .0% 100 .0%
Dividend Payout ratio 82 .0% 72 .4%
Dividend Payout ratio on Adjusted EPS 70 .1%

(a) Adjusted earnings per share is a non-GAAP accounting measure that is calculated by adding back the costs and losses relating to SDL’s two
recent acquisitions. It is provided to provide investors with a more meaningful like-for-like comparison against the prior year earnings per share.
Shares on issue rose slightly (+3 .6%) over FY2018, entirely the result of SDL staff exercising Employee Share
Option Programme (“ESOP”) options that were issued in 2014 . The bulk of ESOP options have been exercised
with only 80,000 options now outstanding under this programme .
Operational Performance
The industry-wide decline in general mail volume is continuing and anecdotal industry comments suggest that
the rate of decline increased in FY2018 . SDL’s mail volumes dropped 8 .6%, partly cushioned by some new
business gain . The Company’s digital print volumes increased 7 .6% on last year . SDL’s print equipment has
significant capacity, particularly from a high-speed, continuous printer under the DMS agreement with FXNZ .
The Company has progressively transitioning a greater proportion of its print jobs from cut sheet printers onto
the continuous printer as this provides efficiency benefits . Any material growth in continuous print volume
under the DMS agreement would likely require a modest increase in the level of production staff and possibly
some additional document handling equipment .
New Zealand Postal Market
The domestic postal services market continues to evolve, and changes in 2018 are not positive for physical
mail volumes . Previously, in July 2015, NZ Post commenced the process of reducing the number of delivery
days per week for standard letter mail in major towns and cities to three days, although it is continuing to
provide six-day-per-week delivery for premium mail . Earlier in 2018, NZ Post announced a substantial increase
in the price of mail that took effect from 1 July 2018 . The price of a standard letter increased by 20 cents from
$1 .00 to $1 .20, and bulk mail prices also increased along with tighter conditions to achieve bulk pricing .
There are examples of one-off sizeable mail price increases overseas, including Australia, in recent years . The
experience has tended to result in a one-off step down in mail volumes, subsequently followed by ongoing
volume erosion then continuing from the lower base . SDL has no reason to assume anything other than a
similar experience is likely in New Zealand, with the main uncertainty around how quickly the Company’s
customers react and begin the push to digitise more of their communications .

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These price changes by NZ Post may create opportunities for SDL as it may force some customers to
accelerate moves towards greater use of digital communications solutions . The Company tracks how its major
customers utilise print versus electronic delivery for transactional mail . FY2018 has already seen a pick-up in
the rate at which customers are switching to digital and we expect a further, probably significant, step up in
that rate during FY2019 . SDL is well positioned to capitalise on this, given its breadth of technology offerings
with solutions for digitally communicating with and servicing customers (these can also deliver significant
communications and document creation cost savings) .
Nevertheless, if the Company’s customers opt in FY2019 to more rapidly switch towards greater electronic
communications, SDL will inevitably suffer margin loss from lower utilisation of its printing assets and any
revenue and margin gained from SDL Software & Technology will not be sufficient to offset this decline .
Risk Factors
The physical mail market will continue to decline in volume with the probability of a one-off more sizeable
decline in FY2019 resulting from recent NZ Post price increases . This has several industry-wide implications .
First, excess printing capacity in the mail house physical print sector, already a problem, will inevitably
worsen . Secondly, increased competition for lower volumes may spill over into pricing and margin pressure .
The risk is partly mitigated by SDL’s ability to add value through its technology offerings although excessive
price discounting of printing services would affect profitability across the entire industry and SDL would
not be immune to this threat . Additionally, pressure on marginal print operators is likely to cause industry
rationalisation, although SDL may benefit from being able to acquire distressed print volumes (without buying
the associated print assets) .
SDL’s top five customers provided 40% of the Company’s revenue in FY2018 with the largest customer
accounting for 12% of revenue . Loss of one or more of those customers could cause financial results to differ
materially from those outlined in the FY2019 Outlook section below . This risk is partly mitigated by having a
number of these clients under contract, as well as the offset of expecting revenue growth outside these clients,
particularly from DéjarMail .
The Company’s software provides critical document management and storage functions for its clients . SDL
needs to ensure it continues to maintain adequate levels of software quality control . SDL also regards IT and
data security as a potential risk area and regularly reviews its IT and data security arrangements .
The Company operates a single site facility, albeit with an offsite for data and server backup . The Directors
are conscious of the operational risk a single site implies for digital imaging operations . SDL has investigated
reciprocal disaster recovery (“DR”) plans with other printers, and the Company has some capability with Fuji
Xerox, however, in general, print capacity mismatches have meant there are few possible solutions . SDL
continues to explore DR options .
The Company relies on several third party distributors to market and support its software products, especially
in international markets . There is no certainty that these arrangements will be successful in meeting revenue
expectations and SDL may be required to devote more time and funds to support its existing international
distribution structures .
Technology Innovation
SDL operates in both the old economy print/mail house business and the new economy document
management business . While there are many areas where printed mail is continuing to decline, some elements
(e .g . direct marketing) of print and mail remain reasonably resilient . Nevertheless, SDL is continuing to innovate
and develop its software offerings to ensure the Company is agnostic in the communication channels it is able
to offer its clients to communicate with their customers .
SDL has been progressively managing its portfolio of digital document software IP to ensure the Company
is capable of making this progressive transition towards the growing emphasis on digital customer
communications . This involves increasing internationalisation of SDL’s revenues, both through software
product development and acquisitions such as DTP, as well as the development of channel partners to build
distribution .
MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED
Solution Dynamics Limited

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Share Trading Liquidity
The Directors are conscious that the Company’s shares trade infrequently and that this is likely to result in
higher than desired share price volatility and limited ability for investors to enter or exit a holding . There are
likely several factors behind this, but predominantly two main ones; the high extent to which large blocks of
SDL’s shares are held by parties who do not normally trade them, reducing the effective free float, and the fact
that SDL is listed on NZX’s secondary, NZAX, board . There is no action the Company can take in respect of the
first factor .
On the second factor, NZX has commenced a process to review and simplify its Listing Rules, and as part of
that is also looking to simplify its equity market structure and consolidate the NZAX and NXT markets into a
single NZSX Main Board . The NZX Listing Rule review is well advanced but is still subject to FMA approval .
Subject to timing of the approval of the new Rules, the window for the Company to transition from NZAX to the
main board should open in early 2019 . With the caveat that the Directors are yet to see and take advice on the
updated Listing Rules, SDL intends to transition to a NZSX Main Board listing as soon as practical in 2019 and
then review liquidity to see if further actions are warranted .
FY2019 Outlook
After a good result for FY2018, the Company is cautious for FY2019 . The mail pricing actions by NZ Post
will inevitably mean volume and margin erosion in SDL’s print and mail house operations . While there will be
some offsetting volume switch into SDL’s digital revenues, the amount of dollar margin achieved for a digital
communication processed by SDL is significantly less than for a similar print and mail communication .
Software revenues in the UK are continuing to increase and we expect this trend to continue in FY2019 . In
Europe, Post Nord is expected to begin progressively utilising SDL’s technology, although the rate of customer
take up is uncertain at this stage and the FY2018 result benefitted from one-off setup and customisation
revenues for Post Nord . Furthermore, SDL has added additional support and business development
infrastructure in the UK and the market development cost subsidy programme from NZTE expired at 30 June,
meaning UK costs will show a sizeable net increase in FY2019 .
The acquisition of Scantech will make a positive addition to earnings and that business is currently operating
to expectations . However, the Scantech contribution will be partially offset by expected losses from DTP in the
US . DTP has a number of very significant customer opportunities, but even if some of these are successfully
closed, the lead times to fully implement and bring the customers on board may mean that little benefit is
gained in FY2019 .
Lastly, the accounting rules around amortisation of acquisition intangibles mean that SDL will incur an
additional non-cash charge of around $0 .205 million (after tax) per annum for the next four years . The Directors
have determined that the non-cash charge for amortisation related to acquired intangibles will be ignored for
the purposes of SDL’s dividend payout policy .
The combined effect of NZ Post price changes on margins, expiry of NZTE market development contribution,
intangibles amortisation and DTP losses are sufficiently large that it is only broadly offset by the addition of
Scantech earnings and Software & Technology growth in the UK and Europe .
Consequently, SDL’s outlook for FY2019 is for a modest decline of around 5-10% in reported net profit
after tax . Note that this forecast includes the full year impact of amortising the intangible assets that were
acquired with Scantech and DTP and if these are excluded, then the FY2019 earnings are expected to show
a low single digit percentage increase . The Company’s forecast does include some moderate growth in new
business assumptions and is subject to the usual risks that the print and mail house market remain extremely
competitive and in decline .
Yours sincerely
John McMahon Nelson Siva
Director (Chairman) Director (CEO)
MANAGEMENT DISCUSSION AND ANALYSIS CONTINUED

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STATEMENT OF CORPORATE GOVERNANCE
The corporate governance processes set out in this statement do not materially differ from the principles set
out in the New Zealand Stock Exchange Corporate Governance Best Practice Code issued on May 2017 .
Financial Statements
It is the Directors’ responsibility to ensure preparation of consolidated financial statements that present
fairly the financial position of the Group as at the end of the financial year and the results of operations and
cash flows for the year . The external auditors are responsible for expressing an independent opinion on the
consolidated financial statements .
The consolidated financial statements set out in this report have been prepared by management in accordance
with generally accepted accounting practice in New Zealand . They are based on appropriate accounting
policies which have been consistently applied and which are supported by reasonable judgements and
estimates .
After reviewing internal management financial reports and budgets the Directors believe that the Group will
continue to be a going concern in the foreseeable future . For this reason they continue to adopt the going
concern basis in preparing the consolidated financial statements .
Board of Directors
The Group’s constitution requires a minimum of three Directors, of whom two must be ordinarily resident in
New Zealand . The maximum number of Directors is seven .
At least one third of Directors shall retire from office each year at the annual general meeting but shall be
eligible for re-election . The retiring Directors must be those Directors who have been longest serving since they
were last elected .
Directors who are appointed by the Board rather than by ordinary resolution by shareholders must retire at the
next annual general meeting but will be eligible for re-election .
The Board currently comprises four Directors, being a non-executive chairman, two non-executive Directors
and the Chief Executive .
The Directors have a wide range of skills and expertise that they use to the benefit of the Group .
The primary responsibilities of the Board include:
• to establish the vision of the Group
• to establish the long-term goals and strategies of the Group
• to approve annual and half-year financial reports
• to approve annual budgets
• to approve corporate policies
• to ensure the Group has good internal controls and keeps adequate records
• to ensure legislative compliance
• to monitor executive management
• to ensure appropriate communication to stakeholders
Board procedures are governed by the Constitution .
Conflicts of Interest and Related Parties
All Directors must disclose any general and specific interests that could be in conflict with their obligations to
the Group . Transactions with related parties and balances outstanding relating to the year ended 30 June 2018
are disclosed in Note 12 of the Notes to the Consolidated Financial Statements .
Risk Management
The Board is responsible for the Group’s system of internal controls . The Board monitors the operational and
financial aspects of the Group and considers recommendations from external auditors and advisors on the
risks that the Group faces .
Solution Dynamics Limited

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STATEMENT OF CORPORATE GOVERNANCE
The Board ensures that recommendations made are assessed and appropriate action is taken where
necessary to ensure risks are managed appropriately .
Internal Controls
It is the responsibility of the Directors to ensure adequate accounting records are kept . Directors are also
responsible for the Group’s system of internal financial controls .
Internal financial controls have been implemented to minimize the possibility of material misstatement . They
can provide only reasonable assurance and not absolute assurance against material misstatements or loss .
No major breakdowns of internal controls were identified during the year .
Committees
The Board operates no committees .
Audit Committee
The Board does not have an audit committee . The entire Board carries out reviews of the half-yearly and annual
financial reports .
Attendance at meetings
During the period 1 July 2017 to 30 June 2018 attendance at meetings was:
Board Meetings Board Meetings
Held Attended
John McMahon (Chairman) 11 11
Julian Beavis 11 11
Nelson Siva (CEO) 11 11
Elmar Toime 11 11
Directors’ Remuneration
Directors’ remuneration during the year is disclosed in Note 29 of the Notes to the Consolidated Financial
Statements .
Executives’ Remuneration
Executives’ remuneration greater than $100,000 per annum received in their capacity as employees during the
year is disclosed in Note 22 of the Notes to the Consolidated Financial Statements .
Entries in the Interests Register
In addition to the interests and related party transactions disclosures in Note 12 of the Notes to the
Consolidated Financial Statements, there were no interests disclosed to the Board during the year .
Directors’ Share Dealings and Shareholding
Directors’ disclose the following relevant interests in shares in the Group at 30 June 2018 and transactions in
relevant interests in shares during the financial year ended 30 June 2018 .
Shareholder Balance 30 June 2017 Additions Disposals Balance 30 June 2018
John McMahon 1,504,801 - - 1,504,801
Nelson Siva 830,000 140,000 - 970,000

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Grant Thornton New Zealand
Audit Partnership


L4, Grant Thornton House

152 Fanshawe Street
PO Box 1961
Auckland 1140

T +64 9 308 2570

F +64 9 309 4892
www.grantthornton.co.nz





Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd











To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx to
yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its financial
performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice. The firm has no other interests in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.



Independent Auditor’s Report

Grant Thornton New Zealand
Audit Partnership


L4, Grant Thornton House

152 Fanshawe Street
PO Box 1961
Auckland 1140

T +64 9 308 2570

F +64 9 309 4892
www.grantthornton.co.nz





Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd











To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx to
yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its financial
performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice. The firm has no other interests in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.



Independent Auditor’s Report

Grant Thornton New Zealand
Audit Partnership


L4, Grant Thornton House

152 Fanshawe Street
PO Box 1961
Auckland 1140

T +64 9 308 2570

F +64 9 309 4892
www.grantthornton.co.nz





Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd











To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx to
yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its financial
performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice. The firm has no other interests in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.



Independent Auditor’s Report

Grant Thornton New Zealand
Audit Partnership

L4, Grant Thornton House
152 Fanshawe Street
PO Box 1961
Auckland 1140

T +64 9 308 2570
F +64 9 309 4892
www.grantthornton.co.nz






Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd











To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx to
yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its financial
performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice. The firm has no other interests in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.



Independent Auditor’s Report

To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx
to yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement
of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its
financial performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards Board .
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board . Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report . We are independent of the Group in accordance with Professional and Ethical Standard
1 (Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these requirements .
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion .
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice . The firm has no other interests in the Group .
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements of the current period . These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters .

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KEY AUDIT MATTER
OUR PROCEDURES TO ADDRESS
THE KEY AUDIT MATTER
Carrying Value of Goodwill
The Group has significant goodwill of $1,061,000 of
which $938,000 derives from historical acquisitions
of businesses controlled by Dejar Holdings Ltd and
Bremy Ltd . We considered the goodwill relating to these
business acquisitions to be a key audit matter . Goodwill
is allocated across its software cash generating units .
Any risk of downturn in the macroeconomic environment
could result in an indicator of impairment in goodwill .
The inherent uncertainty involved in forecasting
and discounting future cash flows is one of the key
judgement areas that the audit is concentrated on . The
uncertainty is affected by a number of factors including
general market trends, the number of new customs for
the technology solutions, expectation of future growth in
demand for the software solutions, which form the basis
for the assessment of recoverability .
Goodwill additions of $123,000 during the year arose
from two new business acquisitions . Note 19 and note
33 provides disclosures on the business combinations .
In this area our audit procedures included assessment of
forecast and budgeting procedures as a basis for value
in use calculations . We also compared management’s
historical budget to actual performance and future
projections compared to prior year actual and testing
reasonableness of forecasting assumptions . In addition,
we performed our own assessments in relation to key
inputs such as projected revenue growth, cost and
overhead inflation and discount rates . We have used our
own valuation specialist to evaluate the reasonableness
of the assumptions and methodologies adopted
including discount rates used by the Group . We also
assessed whether the Group’s disclosures about the
value in use calculation including sensitivity in key
assumptions reflected the risks inherent in the valuation
of goodwill .
For newly acquired goodwill refer to the key audit matter
on Business Combinations .
Accuracy of revenue
The Group has revenue of approximately $23m
principally comprising sale of goods and rendering of
services under contract . The principal risk associated
with revenue associated with its commercial operations,
relates to its recognition and recoverability . There are a
number of factors that could affect this amount .
• Delivery may not have occurred before year end
which would allow the goods to be recorded as a
sale in line with the revenue recognition policy .
• Revenues recognised from contracts may not
be appropriate with reference to the stage of
completion . Stages of completion may include
estimates and judgements that impact the amount
of revenue recognised .
In this area our audit procedures included evaluating
the Group’s recognition of revenue by assessing the
procedures and controls that the Group has in place
and that appropriate revenue recognition policies have
been applied . In relation to sales cut-off, we performed
detailed substantive testing on sales recognised or
adjusted either side of year end to substantiate that the
appropriate terms of the relevant contracts had been
satisfied . Our audit work included assessing the stage
of completion of any significant projects including the
delivery of the goods to ensure that the risks and rewards
associated with the contract had been passed to the
customer, including obtaining evidence of post year end
cash which provided evidence as to validity of debtors at
the year end .
Business Combinations
- valuation of investments in new businesses
During the reporting year 30 June 2018 the Group
acquired two new businesses, Scantech Limited and
DigitalToPrint Inc . Net assets acquired of $1 .0m
and other disclosures can be seen in Note 33 . We
considered the measurement, recognition and
disclosure of these business acquisitions to be a key
audit matter .
The procedures we performed to conclude on the
business combinations included:
Understanding the sale and purchase agreements for
each acquisition, critically assessing the approach and
assumptions used to identify and value all the intangible
assets present in these business combinations as well
as the other tangible assets . We evaluated and tested
the Directors estimates and judgements surrounding
contingent consideration elements arising from future
expected payments ‘earn-out’ to vendors based upon
achieving specific sales targets over the following
12 month period from the acquisition date . We also
assessed a range of possible outcomes and challenged
assumptions made by Directors and whether there
are indicators of impairment in respect of any of these
investments .

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Chartered Accountants
Member of Grant Thornton International Ltd



An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates, as well as evaluating the overall presentation of the
consolidated financial statements.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it
controlled in the area of taxation advice. The firm has no other interest in Solution
Dynamics Limited and the entities it controlled.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements on pages 15 to 45
present fairly, in all material respects, the financial position of Solution Dynamics Limited
and the entities it controlled as at 30 June 2016 and their financial performance and cash
flows for the year then ended in accordance with New Zealand Equivalents to International
Financial Reporting Standards.

Restriction on use of our report
This report is made solely to the Company’s shareholders, as a body. Our audit work has
been undertaken so that we might state to the Company’s shareholders, as a body those
matters which we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinion we have formed.

Grant Thornton New Zealand Audit Partnership
Auckland, New Zealand
19 September 2016
Grant Thornton New Zealand
Audit Partnership


L4, Grant Thornton House

152 Fanshawe Street
PO Box 1961
Auckland 1140

T +64 9 308 2570

F +64 9 309 4892
www.grantthornton.co.nz





Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd











To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx to
yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its financial
performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice. The firm has no other interests in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.



Independent Auditor’s Report

Other Information
The directors are responsible for all other information included in the Group’s Annual Report . The other
information comprises the management discussion and analysis and the statement of corporate governance
included in the annual report, but does not include the financial statements and our auditor’s report thereon .
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of audit opinion or assurance conclusion thereon .
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated . If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact . We have nothing to report in this regard .
Directors’ responsibilities for the consolidated Financial Statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with New Zealand equivalents to International Financial
Reporting Standards issued by the New Zealand Accounting Standards Board, and for such internal control
as the Directors determine is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error .
In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so .
Auditor’s responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion . Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (NZ) will always detect a material misstatement when it exists . Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements .
A further description of the auditor’s responsibilities for the audit of the financial statements is located on the
External Reporting Board’s website at: https://www .xrb .govt .nz/standards-for-assurance-practitioners/auditors-
responsibilities/audit-report-1/
Restriction on use of our report
This report is made solely to the Group’s shareholders, as a body . Our audit work has been undertaken so that
we might state to the Group’s shareholders, as a body those matters, which we are required to state to them
in an auditor’s report and for no other purpose . To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Group and its shareholders, as a body, for our audit work, for
this report or for the opinion we have formed .
Grant Thornton New Zealand Audit Partnership
K T Price
Partner
Auckland, New Zealand
30 August 2018
Grant Thornton New Zealand
Audit Partnership


L4, Grant Thornton House

152 Fanshawe Street
PO Box 1961
Auckland 1140

T +64 9 308 2570

F +64 9 309 4892
www.grantthornton.co.nz





Chartered Accountants and Business Advisers
Member of Grant Thornton International Ltd











To the Shareholders of Solution Dynamics Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Solution Dynamics Limited (the Group) on pages xx to
yy which comprise the consolidated statement of financial position as at 30 June 2018 and the consolidated
statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Solution Dynamics Limited and the entities it controlled as at 30 June 2018 and its financial
performance and cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ))
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
section of our report. We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Our firm carries out other assignments for Solution Dynamics Limited and the entities it controlled in the area of
taxation returns and advice. The firm has no other interests in the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.



Independent Auditor’s Report

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 30 June 2018
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 30 June 2018
$000
$000
2012
2012
NOTE
$000
$000
$000
$000
Revenue 4 22,383 19,788
Other revenue 4 349 203
22,732 19,991
Expenses 5 20,459 17,904
Earnings before interest, tax, depreciation & amortisation (EBITDA) 2,273 2,087

Depreciation 17 208 208
Amortisation of intangible assets (software) 18 161 78
Net interest (income) 7 (5) (1)
Profit before income tax 1,909 1,802

Income tax 8 577 492
Net profit after income tax 1,332 1,310
Cents Cents
Basic earnings per share 9 9 .3 9 .3
Diluted earnings per share 9 9 .1 8 .9
2017
2017
2018
2018
The accompanying notes on pages 21 - 45 form part of the consolidated financial statements .
Solution Dynamics Limited
Solution Dynamics Limited
Net profit after income tax 1,332 1,310
Items that may be reclassified subsequently to profit and loss:
Exchange gain on translation of foreign operations (9) 1
Other comprehensive (loss)/income net of tax (9) 1
Total comprehensive income for the year 1,323 1,311

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$000
2012
NOTE
$000 $000
Current Assets
Cash and cash equivalents 10 1,956 2,080
Trade & other receivables 13 2,902 2,366
Inventories and work in progress 11 183 152
Prepayments 131 96
Total Current Assets 5,172 4,694
Current Liabilities
Trade creditors 1,871 1,428
Other current liabilities 14 1,245 903
Other non-financial liabilities 15 444 405
Employee benefit liabilities 16 472 447
Total Current Liabilities 4,032 3,183
Working Capital 1,140 1,511
Non-Current Assets
Deferred tax (liability) asset 8 (24) 108
Capital works in progress 61 73
Property, plant & equipment 17 594 595
Intangible assets 18 1,179 294
Goodwill 19 1,061 938
Total Non-Current Assets 2,871 2,008
Net Assets 4,011 3,519
Equity
Share capital 20 5,357 5,169
Employee share option plan 31 28 113
Foreign currency translation reserve (8) 1
Accumulated losses 21 (1,366) (1,764)
Total Equity 4,011 3,519
For and on behalf of the Board who approved these consolidated financial statements for issue on 30 August 2018 .

John McMahon – Director (Chairman) Nelson Siva – Director (CEO)
20172018
The accompanying notes on pages 21 - 45 form part of the consolidated financial statements .
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
Solution Dynamics Limited

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$000 $000 $000 $000 $000
ACCUMULATED
LOSSES
EMPLOYEE
SHARE PLAN
CURRENCY
TRANSLATION
RESERVE
SHARE
CAPITAL
TOTAL
EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2018
The accompanying notes on pages 21 - 45 form part of the consolidated financial statements .
Solution Dynamics Limited
Balance 1 July 2016 5,169 77 - (2,266) 2,980
Issue of shares to employees - 36 - - 36
Transactions with owners - 36 - - 36
Profit for the year after tax - - - 1,310 1,310
Dividend paid - - - (808) (808)
Other comprehensive income - - 1 - 1
Total comprehensive income - - 1 502 503
Balance 30 June 2017 5,169 113 1 (1,764) 3,519
Exercise of employee share options 188 (108) - 108 188
Issue of shares to employees - 23 - - 23
Transactions with owners 188 (85) - 108 211
Profit for the year after tax - - - 1,332 1,332
Dividend paid - - - (1,042) (1,042)
Other comprehensive (loss) - - (9) - (9)
Total comprehensive income - - (9) 290 281
Balance 30 June 2018 5,357 28 (8) (1,366) 4,011

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The accompanying notes on pages 21 - 45 form part of the consolidated financial statements .
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
$000
2012
NOTE
$000 $000
Cash Flow From Operating Activities
Cash was provided from:
Receipts from sales 25,041 22,339
Other revenue 293 131
25,334 22,470
Cash was applied to:
Payments to suppliers 15,830 13,543
Payments to employees 6,621 6,091
GST paid to Inland Revenue 1,261 1,155
23,712 20,789
Net Cash Inflow From Operating Activities 23 1,622 1,681
Cash Flow From Investing Activities
Cash was applied to:
Purchase of property, plant and equipment & capital works in progress 120 112
Purchase of software & intangible assets 68 94
Payments for businesses acquired 33 712 -
900 206
Net Cash Outflow From Investing Activities (900) (206)
Cash Flow from Financing Activities
Cash was provided from:
Exercise of employee share options 188 -
Interest received 5 6
193 6
Cash was applied to:
Payment of dividends 1,039 808
Interest paid - 5
Finance lease liabilities secured on equipment - 10
1,039 823
Net Cash (Outflow) From Financing Activities (846) (817)
Net change in cash and cash equivalents (124) 658
Add cash and cash equivalents held at beginning of year 2,080 1,422
Cash and cash equivalents at end of year 10 1,956 2,080
20172018
Solution Dynamics Limited

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1 . CORPORATE INFORMATION
The consolidated financial statements of Solution Dynamics Limited (SDL or Company) and its subsidiaries,
Solution Dynamics International Limited, Solution dynamics Incorporated and Déjar International Limited
(collectively the Group) for the year ended 30 June 2018 were authorised for issue in accordance with a
resolution of directors on 30 August 2018 .
Solution Dynamics Limited is a public company incorporated and domiciled in New Zealand and is listed
with the New Zealand Stock Exchange on the NZAX . The registered office is located at 18 Canaveral Drive,
Albany in Auckland .
The Group offers a range of integrated solutions encompassing data management, electronic digital printing,
document distribution, web presentment and archiving, fulfilment, traditional print services, scanning, data
entry and document management .
2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of Compliance
The consolidated financial statements of the Group comply with New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS) .
2.2 Basis of Preparation
2.2.1 Basis of Preparation
The consolidated financial statements have been prepared on the historical cost basis but modified,
where applicable, by the measurement of fair value of selected financial assets and financial liabilities . The
consolidated financial statements have also been prepared on the basis that the Group operates on a going
concern basis . Accounting policies are selected and applied in a manner which ensures that the resulting
financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of
the underlying transactions or other events is reported . The principal accounting policies are set out below .
2.2.2 Basis of Consolidation
The financial statements have been prepared in compliance with generally accepted accounting practice in
New Zealand (NZ GAAP), the Companies Act 1993, The financial Reporting Act 2013 and other authoritative
pronouncements issued by the New Zealand Accounting Standards Board (NZ ASB) . For the purposes of
complying with NZ GAAP the Group is a for-profit entity that has followed the Tier 1 for – profit reporting
requirements set out by the External Reporting Board, in its “Accounting Standards Framework .”
All subsidiaries have a 30 June reporting date and consistent accounting policies are applied .
The acquisition method is used to prepare the consolidated financial statements, which involves adding
together like items of assets, liabilities, income and expenses on a line-by-line basis . All transactions and
balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies .
2.2.3 Rounding of Amounts
Amounts in the consolidated financial statements have been rounded off to the nearest $000 unless
otherwise specified .
SPECIFIC ACCOUNTING POLICIES
The following specific accounting policies, which significantly affect the measurement of financial performance,
financial position and cash flows, have been applied .
2.3 Foreign Currency
2.3.1 Functional and Presentation Currency
Items included in the consolidated financial statements are measured using the currency of the primary
economic environment in which the entity operates (the ‘functional currency’) . The consolidated financial
statements are presented in New Zealand dollars, which is the Group’s functional and presentational
currency .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
2.3.2 Transaction and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions . Monetary assets and liabilities denominated in foreign currencies at the reporting
date are retranslated to the functional currency at the exchange rate at that date . Foreign exchange gains and
losses resulting from the settlement of such transactions are accounted for in the Consolidated Statement of
Comprehensive Income .
2.4 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable . Revenue is reduced for
estimated customer returns, rebates and other similar allowances .
2.4.1 Sale of Goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• the Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the entity; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably .
2.4.2 Rendering of Services
Revenue from a contract to provide services is recognised by reference to the stage of completion of the
contract . The stage of completion of the contract is determined with reference to the contractual rates, labour
hours and direct expenses as these are incurred .
2.4.3 Interest Revenue
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount .
2.4.4 Government Grants
Government grants are recognised as revenue when the conditions attached to the grant have been met .
Where there are unfilled conditions attaching to the grant, the amount relating to the unfilled condition is
recognised as a liability and released to revenue as the conditions are met .
2.5 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee . All other leases are classified as operating leases .
2.5.1 The Group as Lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease .
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount
of the leased asset and recognised on a straight-line basis over the lease term .
2.5.2 The Group as Lessee
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments . The corresponding
liability to the lessor is included in the Consolidated Statement of Financial Position as a finance lease
obligation .
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability . Finance charges are charged
directly to the Consolidated Statement of Profit or Loss .
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed .

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
In the event that lease incentives are received to enter into operating leases, such incentives are recognised
as a liability . The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-
line basis, except where another systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed .
2.6 Employment Benefits
The Group recognises liabilities for benefits accruing to employees in respect of wages and salaries, annual
leave, long service leave and sick leave when it is probable that settlement will be required, and they are
capable of being measured reliably .
Provisions made in respect of employee benefits expected to be settled within 12-months of each reporting
date are measured at their nominal values using the remuneration rate expected to apply at the time of
settlement .
Provisions made in respect of employee benefits which are not expected to be settled within 12-months of
each reporting date are measured as the present value of the estimated future cash outflows to be made by
the Group in respect of services provided by employees up to the reporting date .
2.7 Share-based Payments
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date . Details regarding equity settled share-based transactions is set out in note 31 .
The fair value determined at the grant date of the equity settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will
eventually vest . At each reporting date, the Group revises its estimate of the number of equity instruments
expected to vest .
The impact of the revision of the original estimates, if any, is recognised in the Consolidated Statement of
Profit or Loss over the remaining period, with a corresponding adjustment to the equity-settled employee
benefits reserve .
2.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax .
2.8.1 Current Tax
The tax currently payable is based on the taxable profit for each reporting period . The taxable income or
loss differs from the amount as reported in the Consolidated Statement of Profit or Loss because it excludes
items of income or expense that are taxable or deductible in other years and it further excludes items that are
never taxable or deductible . The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the financial year end, and any adjustment to tax payable in respect of
previous years .
2.8.2 Deferred Tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit and is
accounted for using the liability method . Deferred tax liabilities are generally recognised for all taxable
temporary differences, and deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised . Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit .
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and associates, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future . Deferred
tax assets arising from deductible temporary differences associated with such investments and interests are
only recognised to the extent that it is probable that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future .

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered .
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted at each reporting date . The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities .
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis .
2.8.3 Current and Deferred Tax for Each Reporting Period
Current and deferred tax are recognised as income or an expense within the Consolidated Statement of Profit
or Loss, except when they relate to items credited or debited directly to equity, in which case the tax is also
recognised directly in equity, or where they arise from the initial accounting for a business combination . In the
case of a business combination, the tax effect is taken into account in calculating goodwill or in determining
the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities over the cost of the business combination .
2.9 Goods and Services Tax (GST)
Revenue, expenses, assets and liabilities are recognised net of the amount of goods and service tax (GST),
except:
• where the amount of GST incurred is not recovered from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an item of expense; or
• for receivables and payables which are recognised inclusive of GST .
The net amount of GST recoverable from, or payable to, Inland Revenue is included as part of receivables or
payables .
2.10 Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment
losses, if any . Cost includes all expenditure that is directly attributable to the acquisition of the asset . Software
that is integral to the functionality of the related equipment is capitalised as part of the asset .
Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the
straight-line method . The estimated useful lives, residual values and depreciation method are reviewed at the
end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis .
The principal depreciation rates used in the reporting periods are:
• Leasehold Improvements 6 .5 – 7 .8%
• Furniture and Fittings 8 .5 – 39 .6%
• Plant and Machinery 7 .0 - 30 .0%
• Computer Equipment 20 .0 – 36 .0%
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease .
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in the Consolidated Statement of Profit or Loss .
2.11 Intangible Assets
2.11.1 Intangible Assets Acquired with a Finite Life
Intangible assets with a finite life, acquired separately are reported at cost less accumulated amortisation and
accumulated impairment losses . Amortisation is charged on a straight-line basis over their estimated useful
lives . The estimated useful life and amortisation method are reviewed at the end of each annual reporting
period, with the effect of any changes in estimate being accounted for on a prospective basis .

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
2.11.2 Internally-Generated Intangible Assets with a Finite Life
Expenditure on research activities is recognised as an expense in the Consolidated Statement of Profit or
Loss in the period in which it is incurred .
An internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognised if, and only if, all of the following have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to
use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development .
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first meets the recognition criteria listed above . Where no
internally generated intangible asset can be recognised, development expenditure is charged as an expense
to the Consolidated Statement of Profit or Loss in the period in which it is incurred .
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
acquired separately .
Amortisation is charged on a straight-line basis over the estimated useful lives of internally generated
intangible assets . The estimated useful life and amortisation method are reviewed at the end of each annual
reporting period, with the effect of any changes in estimate being accounted for on a prospective basis .
2.11.3 Subsequent Measurement
All intangible assets, including capitalised internally developed software, are accounted for using the cost
model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as
these assets are considered finite . Residual values and useful lives are reviewed at each reporting date . In
addition, they are subject to impairment testing as described in Note 2 .13 . The following useful lives are
applied:
• Software 3-5 years .
2.11.4 Intangible Assets Acquired in Business Combination
Intangible assets acquired in a business combination are identified and recognised separately from goodwill
where they satisfy the definition of an intangible asset, are identifiable and their fair values can be measured
reliably . The cost of such intangible assets is their fair value at the acquisition date .
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost
less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
acquired separately .
• Customer contracts 3-4 years .
2.12 Goodwill
Goodwill arising on the acquisition of a “business” as defined in NZ IFRS 3 Business Combinations
represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the
identifiable assets and liabilities of the business recognised at the date of acquisition . Goodwill is initially
recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment
losses .
2.13 Impairment of Assets
At each reporting date, the Group reviews the carrying amounts of its tangible and finite life intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss . If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any) . Where it is not possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs .

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28
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
Intangible assets with indefinite useful lives, goodwill and intangible assets not yet available for use are
tested for impairment annually, and whenever there is an indication that the asset may be impaired .
Recoverable amount is the higher of fair value less costs to sell and value in use . In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted .
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount .
An impairment loss is recognised immediately as an expense within the Consolidated Statement of Profit or
Loss .
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years . Any impairment loss associated with
goodwill will not be reversed in a subsequent reporting period .
2.14 Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short
term, highly-liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value .
2.15 Inventories
Inventories are stated at the lower of cost and net realisable value . Costs are assigned to inventories by the
method most appropriate to the particular class of inventory, with the majority being valued on a first-in-first-
out basis . Net realisable value represents the estimated selling price for inventories less all estimated costs
of completion and costs necessary to make the sale .
2.16 Financial Assets
Financial assets are recognised and derecognised on trade date where the purchase or sale of a financial
asset is under a contract whose terms require delivery within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets
classified as at fair value through profit or loss, which are initially measured at fair value .
2.16.1 Loans and Receivables
Trade and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables . Loans and receivables are measured at amortised cost using
the effective interest method, less any impairment . Interest revenue is recognised by applying the effective
interest rate .
2.16.2 Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at each reporting date . Financial assets are
impaired where there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the investment have been
impacted .
For certain categories of financial assets, such as trade and other receivables, assets that are assessed
not to be impaired individually are subsequently assessed for impairment on a collective basis . Objective
evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting
payments, an increase in the number of delayed payments in the portfolio past the average credit period of
60 days, as well as observable changes in national or local economic conditions that correlate with default
on receivables .
For financial assets carried at amortised cost, the amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate .
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade and other receivables, where the carrying amount is reduced through the use
of an impairment allowance account . When trade and other receivables are considered uncollectible, they

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29
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
are written off against the allowance account . Subsequent recoveries of amounts previously written off
are credited against the allowance account . Changes in the carrying amount of the allowance account are
recognised as an expense in the Consolidated Statement of Profit or Loss .
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to a change in estimate after the impairment was recognised, the previously recognised
impairment loss is reversed through the Consolidated Statement of Profit or Loss to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised .
2.17 Share Capital
Ordinary shares are classified as equity . Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction from the proceeds, net of tax .
2.18 Trade Payables and Other Current Liabilities
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
annual reporting period which are unpaid . The amounts are unsecured and are usually paid within 60 days
of recognition . These are measured initially at fair value net of transaction costs, subsequently at amortised
cost using the effective interest rate method .
2.19 Statement of Cash Flows
The following terms are used in the Statement of Cash Flows:
Operating activities: are the principal revenue producing activities of the Group and other activities that are
not investing or financing activities .
Investing activities: are the acquisition and disposal of long-term assets and other investments not included
in cash equivalents .
Financing activities: are activities that result in changes in the size and composition of the contributed
equity and borrowings of the entity .
Non-cash financing and investing activities: There were no transactions which have had a material effect
on assets and liabilities that did not involve cash flows and are disclosed in the statement of cash flows .
2.20 Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous reporting period, and no new or
amended Standards since 1 July 2017 have affected these consolidated financial statements .
2.21 New IFRS standards and interpretations issued but not yet adopted
At the date of authorisation of these financial statements, certain new standards and interpretations to
existing standards have been published but not yet effective and have not been adopted early by the Group .
Management anticipates that all pronouncements will be adopted in the first accounting period beginning
on or after the effective date of the new standard . Information on new standards, amendments and
interpretations that are expected to be relevant to the Group financial statements is provided below . Certain
other new standards and interpretations issued but not yet effective, that are not expected to have a material
impact on the Group financial statements have not been disclosed .
(a) NZ IFRS 16 – Leases (effective date from 1 January 2019)
In February 2016 the New Zealand Accounting Standards Board approved the issue of NZ IFRS 16 Leases .
NZ IFRS 16 changes the relevant information to be reported by lessors and lessees with a view to faithful
representation of information to the users of financial statements so they can assess the effect leases have
on cash flow, financial performance and the financial position of the entity . The standard requires the lessee
to recognise assets and liabilities for the rights and obligations created by those leases . Lessors reporting
requirements are similar to the previous standard NZ IAS 17 Leases . Management has made a preliminary
assessment of the impact of adopting this policy on the Group financial statements and has determined that
it will be material . Management expects to recognise a lease asset and lease liability for all lease contracts
such as premises rent and equipment lease .

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30
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
(b) NZ IFRS 15 – Revenue from Contracts with Customers (effective date from 1 January 2018)
NZIFRS 15 establishes principles for reporting useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers . The core principle of NZ IFRS 15 is that an entity recognises revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services .
Due to the nature of revenue and short life cycle of the majority of contract revenues, Directors preliminary
evaluation has indicated that there is no material effect on the Group’s results, but additional disclosures may
be required .
(a) NZ IFRS 9 – Financial instruments – classification and measurement
(effective date from 1 January 2018)
The New Zealand Accounting Standards Board (NZASB) issued the completed version of NZ IFRS 9
Financial Instruments, bringing together the classification and measurement, impairment and hedge
accounting to replace NZ IAS 39 Financial Instruments: Recognition and Measurement and all previous
versions of NZ IFRS 9 .
Management does not expect a significant change to the way in which the Group recognises and measures
its financial instruments as a result but has not performed a full assessment .
3 . CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2, the Directors are
required to make judgements, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources . The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant . Actual results may differ
from these estimates .
The estimates and underlying assumptions are reviewed on an on-going basis . Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods .
3.1 Annual Goodwill Impairment Testing
Determining whether goodwill is impaired requires an estimation of the value in use of the Electronic Content
Management cash-generating unit which is also known as SDL Software . The value in use calculation
requires the Directors to estimate the future cash flows expected to arise from this cash generating unit and
a suitable discount rate in order to calculate present value .
The carrying value of goodwill at each reporting date was $1,061,000 (2017: $938,000) .
The recoverable amount of $938,000 of goodwill has been determined based on a value in use model
applying the budget, approved by the Directors covering the reporting period to 30 June 2018, and forecast
sales based on assessments of the current market opportunities through existing distribution channels net
of forecast costs, through to the end of 2022, at a post-tax discount rate of 5 .6% (2017: 5 .6%) . Cash flows
beyond 2022 have not been taken into account and no terminal value was determined .
The revenue assumptions used for the forecast period are based on management expectations supported
by existing prospects for the budget period and allow for growth of 2 .5% (2017: 2 .5%) per annum over the
balance of the forecast period . The assumptions are subject to fundamental uncertainties, particularly those
surrounding future license sales which comprise a substantial portion of projected revenues and hence only
inflationary growth rates have been applied . Gross margin is forecast to be consistent through the budget
and forecast period .
In determining whether there was any impairment of goodwill associated with the SDL Software operations,
forecasts were prepared based on estimates for all the products sold in each market .
Goodwill of $123,000 arises this reporting period from deferred tax on business combinations . Refer to note
19 and 33 for Directors judgements and estimates .

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31
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
3.2 Business Combinations
During the year the Group acquired two new businesses as detailed in note 33 . The acquisition of the
businesses involved assessments and judgements by Directors surrounding the fair value of assets acquired
in the business combination, including identification of intangible assets .
The purchase price required judgement and estimate by directors of contingent consideration due to the
vendor based upon achieving future sales targets over the 12-month period following acquisition date .
Judgement included considering a range of possible outcomes in order to determine the most likely payable
for earn out .
4 . REVENUE & OTHER INCOME
2018 2017
$000 $000
Sales income 22,383 19,788
Revenue 22,383 19,788
Government grant revenue 293 131
Rent 56 72
Other Revenue 349 203
5 . EXPENSES
2018 2017
Note $000 $000
Acquisition related costs 118 -
Auditor’s remuneration 6 89 76
Freight, postage & external print 8,826 6,892
Directors remuneration - directors fees 30 513 523
Loss / (gain) on foreign exchange (39) (10)
Rental and operating lease expenses 715 692
Redundancy costs 26 34
Research & development 473 334
Salaries 5,630 5,226
Superannuation (KiwiSaver) 152 138
Employee entitlements – share based payments 17 28
Donations 3 3
Other expenses 3,936 3,968
Total Operating Expenses 20,459 17,904
6 . AUDITOR’S REMUNERATION
2018 2017
$000 $000
Audit fees – statutory audit 61 52
Tax compliance and advisory services 28 24
Total auditor’s remuneration 89 76

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32
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
7 . INTEREST
2018 2017
$000 $000
Interest received (5) (6)
Interest on borrowings under finance facilities
Interest on borrowings - 5
Net interest received (5) (1)
8 . INCOME TAX EXPENSE
8.1 Current Tax
2018 2017
$000 $000
Income tax expense comprises:
Current tax expense 586 517
Deferred tax expense relating to the origination and reversal of temporary differences (9) (25)
Total tax expense 577 492
The total charge for the reporting period can be reconciled to the accounting loss as follows:
Net profit before income tax 1,909 1,802
Income tax at company tax rate
(1)
534 504
Permanent differences 34 10
Under / over provision in prior years (8) (25)
Benefit of tax losses not recognised 17 -
Other 6 3
Utilisation of previously unrecognised tax losses (6) -
Income tax expense 577 492
(1)
The Group tax rate of 28% (2017: 28%) has been used. This is the tax rate applicable to the territory where Solution Dynamics
Limited, the primary tax paying entity, is domiciled.
At 30 June 2018 there are imputation credits available of $407,000 (2017: $472,000) for use in subsequent
reporting periods .
8.2 Deferred Tax Balances
2018 2017
$000 $000
Temporary differences
Depreciable and amortisable assets (121) (7)
Accruals and provisions 97 115
(24) 108
Net deferred tax asset not recognised - -
Deferred tax recognised (24) 108
Deferred tax assets arising from deductible temporary differences are only recognised to the extent that it
is probable that taxable profits will be available against which the deductible temporary differences can be
utilised .

|
33
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
2018 2017
$000 $000
Deferred tax movement
Balance at beginning of period 108 133
Current year movement through profit or loss (9) (25)
Deferred tax recognised on business acquisitions (123) -
Balance at end of period (24) 108
9 . EARNINGS PER SHARE (EPS)
2018 2017
$000 $000
Net profit for the year attributable to ordinary shareholders 1,332 1,310
Basic

Weighted average number of ordinary shares (000’s) 14,296 14,060
Cents Cents
Basic earnings per share 9 .3 9 .3

Basic earnings per share is calculated by dividing the net profit after tax attributable to equity holders of
the Company by the weighted average number of ordinary shares outstanding during the reporting period,
adjusted for bonus elements in ordinary shares issued during the reporting period .
Diluted
Weighted average number of ordinary shares (000’s) 14,300 14,060
Adjustment for share options 340 580
Weighted average 14,640 14,640
Cents Cents
Diluted earnings per share 9 .1 8 .9
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all potentially dilutive ordinary shares . Options are convertible into the
Company’s shares and are therefore considered dilutive securities for diluted earnings per share .
10 . CASH AND CASH EQUIVALENTS
2018 2017
$000 $000
Cash and cash equivalents 1,956 2,080
Total 1,956 2,080
Solution Dynamics has an overdraft facility in place with the ANZ Bank at an interest rate of 12 .35% p .a .
(2017: 12 .35%) . This facility is to support the operational requirements of the Group, is interest only and is
secured by first ranking debenture over the assets of the Group .
At period end, the ANZ Bank has imposed no financial covenants to secure the existing facilities . The Group
maintains a $200,000 overdraft facility that was unused at the reporting date 2017: $200,000) . The Group
now holds a net cash position with no bank debt (2017: $Nil) .
At the end of the reporting period the Bank provided commercial guarantees totalling $65,000 (2017:
$65,000) to the Group’s suppliers .

|
34
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
11 . INVENTORIES AND WORK IN PROGRESS
2018 2017
$000 $000
Work in Progress 94 73
Inventory 89 79
Total Inventories and Work in Progress 183 152

12 . RELATED PARTIES TRANSACTIONS
Transactions between related parties include transactions with subsidiaries, shareholders, directors and
their companies and senior executives . Transactions with SDL’s subsidiary Solution Dynamics International
Limited are completed under a supplier agreement on similar terms to those previously struck with third party
channel partners .
Related party transactions from 1 July 2017 to 30 June 2018 were as follows:
• Key management were paid $783,835 (as employees of Solution Dynamics Limited and including the
calculated benefit of the employee share option plan) during the reporting period (2017: $818,267) and
were owed $62,939, including annual leave, at 30 June 2018 (2017: $73,615) .
• During the year ended 30 June 2018 there were sales of $213,649 (2017: $361,005) between Solution
Dynamics Limited and its wholly owned UK subsidiary Solution Dynamics International Limited . Solution
Dynamics International traded at a profit of $153,434 (2017: $90,714) . At the reporting date there was a
receivable of $126,770 (2017: $126,770) due to the Company .
• Solution Dynamics Incorporated traded at a (loss) of ($61,625) (2017: n/a) . At the reporting date there
was a receivable of $87,861 (2017: n/a) due to the Company .
13 . TRADE & OTHER RECEIVABLES
2018 2017
$000 $000
Trade receivables 2,791 2,283
Allowance for doubtful debts - -
2,791 2,283
Allowance for credit notes (11) (10)
Total trade receivables 2,780 2,273
Sundry debtors 122 93
Total Trade & Other Receivables 2,902 2,366
Trading terms & aging of past due trade receivables
The Group’s trading terms require settlement by the 20th of the month following the date of invoice . At the
reporting date the Group had past due debtors of $407,000 (2017: $156,000) for which an allowance of $Nil
(2017: $Nil) was made . There has not been a significant change in credit quality therefore the amounts are
considered recoverable . The Group does not hold any collateral over these balances .
2018 2017
$000 $000
30 – 60 days 192 130
60 – 90 days 187 10
90 – 120 days 28 16
Total overdue trade receivables 407 156

|
35
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Movement in allowance for doubtful debts
2018 2017
$000 $000
Balance at the beginning of the reporting period - -
Accounts written off as uncollectable - -
Total allowance for doubtful debts - -
In assessing the recoverability of trade receivables, the Group considers any change in the quality of
the trade receivables from the date that the credit was initially granted up to the reporting date . The
concentration of credit risk is limited with the largest customer comprising 11% (2017: 11%) of the gross
trade receivable balance, 92% of the outstanding balance is less than 60 days old (2017: 99%) . Accordingly,
the directors believe that no further adjustments for credit are required in excess of the allowance for
doubtful debts .
For the reporting period there are no provisions against third parties (2017: $Nil) .
14 . OTHER CURRENT LIABILITIES
2018 2017
$000 $000
Sundry creditors 211 226
Payroll accruals 224 236
Provision for tax 256 192
Provision for deferred income 151 188
Provision for earnout (note 33) 335 -
Audit fees accrued 68 61
Total Other Current Liabilities 1,245 903
15 . OTHER NON-FINANCIAL LIABILITIES
2018 2017
$000 $000
PAYE 126 104
GST 318 301
Total Non-Financial Liabilities 444 405
16 . EMPLOYEE BENEFIT LIABILITIES
2018 2017
$000 $000
Provision for sick pay 3 5
Provision for long service leave 82 84
Provision for holiday pay 387 358
Total Employee Benefit Liabilities 472 447
Provisions for sick and long service leave are based on the Group’s estimate of the present value of future
costs assuming payroll inflation rate of 2 .0% .

|
36
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
17 . PROPERTY, PLANT AND EQUIPMENT
Plant & Finance Furniture Leasehold Total
Machinery Leased & Fittings Improvements
Plant &
Machinery
$000 $000 $000 $000 $000
Cost
Balance 1 July 2016 2,053 55 141 537 2,786
Transfers 55 (55) - - -
Additions 72 - 4 25 101
Disposals - - - - -
Balance 30 June 2017 2,180 - 145 562 2,887
Transfers - - - - -
Additions 100 - 6 26 132
Acquisitions through business combinations 44 - - 31 75
Disposals - - - - -
Balance 30 June 2018 2,324 - 151 619 3,094
Accumulated depreciation
Balance 1 July 2016 1,677 35 131 241 2,084
Transfers 35 (35) - - -
Depreciation expense 126 - 6 76 208
Disposals - - - - -
Balance 30 June 2017 1,838 - 137 317 2,292
Transfers - - - - -
Depreciation expense 137 - 2 69 208
Disposals - - - - -
Balance 30 June 2018 1,975 - 139 386 2,500
Carrying amount
Balance 1 July 2016 376 20 10 296 702
Balance 30 June 2017 342 - 8 245 595
Balance 30 June 2018 349 - 12 233 594

|
37
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
18 . IDENTIFIABLE INTANGIBLES, FINITE LIFE
Software Software Software Customer Finance Total
- Déjar
(i)
- Bremy Contracts
(ii)
Leased
Software
$000 $000 $000 $000 $000 $000
Cost
Balance 1 July 2016 2,090 110 998 - 7 3,205
Transfers - - 7 - (7) -
Additions - purchased - - 94 - - 94
Balance 30 June 2017 2,090 110 1,099 - - 3,299
Transfers - - - - - -
Additions - purchased - - 74 - - 74
- acquisitions through
business combinations - - 531 441 - 972
Balance 30 June 2018 2,090 110 1,704 441 - 4,345
Accumulated amortisation
Balance 1 July 2016 2,088 110 724 - 5 2,927
Transfers - - 5 - (5) -
Amortisation expense 2 - 76 - - 78
Balance 30 June 2017 2,090 110 805 - - 3,005
Transfers - - - - - -
Amortisation expense - - 135 26 - 161
Balance 30 June 2018 2,090 110 940 26 - 3,166
Carrying amount
Balance 1 July 2016 2 - 274 - 2 278
Balance 30 June 2017 - - 294 - - 294
Balance 30 June 2018 - - 764 415 - 1,179
(i) Déjar software (intellectual property) includes software costs of $1,400,000 purchased from Efactor and
Déjar Holdings .
(ii) Additions acquired through business combinations arose from the Scantech and DTP acquisitions (note 33) .
19 . GOODWILL
Scantech DTP Déjar Bremy Total
$000 $000 $000 $000 $000
Balance at beginning of year - - 215 723 938
Deferred tax on acquisition of customer contracts 66 57 - - 123
Net carrying amount 66 57 215 723 1,061
Goodwill has arisen on the acquisition of a business previously controlled by Déjar Holdings Limited and
Bremy Limited . For impairment testing purposes, goodwill is determined to be associated with the SDL
Software cash generating unit .
No accumulated impairment losses have been recognised against the goodwill .

|
38
|
Solution Dynamics Limited
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2017
The carrying value of goodwill is tested on an annual basis through assessment of the value-in-use of the
SDL Software cash generating unit . The cash flows used in the value-in-use calculations are based firstly
on the management budget for the 2019 year followed by management forecasts over a further three-year
period . Cash flows after 2022 have not been taken into account . Management has projected growth in sales
for the Déjar and Bremy products at 2 .5% per annum for the 2019-2022 forecast period because it reflects
inflation . Growth above inflation has not been projected due to there being uncertainty around this .
The pre-tax discount rate used in the impairment calculation is 26 .0% (2017: 24 .5%) . The equivalent post-
tax nominal rate for the forecast cash flows is 5 .6% (2017: 5 .6%) . In the Directors’ view this represents the
rate that the market would expect on an investment of equivalent risk . There has been no impairment in the
reporting period (2017: $Nil) .
Goodwill of $123,000 arises this period from deferred tax on business combinations . The Directors’
judgement is that there are no indicators of impairment at reporting date or since the business acquisition
date (note 33) .
19.1 Sensitivity to Changes in Assumptions
As at 30 June 2018, the date of the Group’s annual impairment test, the estimated recoverable amount of the
indefinite life intangible assets exceeded their carrying amount by $1,450,000 (2017: $2,195,000) .
It is the judgement of Directors that reasonable changes in the foreseeable future to growth rates and
discount rates (sensitivity analysis) does not result in an impairment loss at 30 June 2018 .
20 . SHARE CAPITAL
2018 2017
$000 $000
Ordinary Shares
Balance at beginning of year 5,169 5,169
Exercise of employee share options 188 -
Share Capital at End of Year 5,357 5,169
The Company had 14,559,810 (2017: 14,059,810) ordinary shares on issue as at 30 June 2018 . All ordinary
shares ranked equally with one vote attached to each fully paid ordinary share and share equally in dividends
and surplus on winding up .
21 . ACCUMULATED LOSSES
2018 2017
$000 $000
Balance at beginning of reporting period (1,764) (2,266)
Net operating profit after income tax 1,332 1,310
Exercise of employee share options 105 -
Payment of dividends (1,039) (808)
Accumulated Losses at end of reporting period (1,366) (1,764)

|
39
|
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2017
22 . EMPLOYEE REMUNERATION
Remuneration includes salaries, bonuses and other benefits including non-cash benefits . The number of
employees with total remuneration exceeding $100,000 in each of the following bands was:
2018 2017
$000 $000
$100,000 to $109,999 4 3
$110,000 to $119,999 - 2
$130,000 to $139,999 - 1
$140,000 to $149,999 1 -
$160,000 to $169,999 - 1
$170,000 to $179,999 2 -
$180,000 to $189,999 - 1
$190,000 to $199,999 1 -
$200,000 to $209,999 1 1
$210,000 to $219,999 - 1
$410,000 to $419,999 1 1
Total staff with remuneration exceeding $100,000 10 11
23 . RECONCILIATION OF NET LOSS AFTER INCOME TAX FOR YEAR WITH NET CASH INFLOW
FROM OPERATING ACTIVITIES
2018 2017
$000 $000
Net profit / (loss) after income tax 1,332 1,310
Adjustments:
Depreciation and amortisation of assets 369 286
Loss / (gain) on foreign exchange (39) (10)
Interest expense (reclassified as financing activity) - -
Interest income (reclassified as financing activity) (5) (1)
Other non-cash items 20 14
Cash flow from trading 1,677 1,599
Add movements in working capital:
(Increase) in trade & other receivables (536) (295)
(Increase) in inventories and work in progress (31) (43)
(Increase) in prepayments (35) (20)
Increase / (decrease) in other current liabilities 28 (30)
Increase in other non-financial liabilities 39 48
Increase in trade creditors 443 347
Increase / (decrease) in employee benefit liabilities 37 75
(55) 82
Net Cash Flows From Operating Activities 1,622 1,681

|
40
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
24 . OPERATING LEASE COMMITMENTS
Operating leases include the property at 18 Canaveral Drive and other equipment . Operating leases have
remaining lease terms of 1- 6 years . The initial term of the 18 Canaveral Drive lease has been varied and
now terminates in September 2022 with a right, subject to penalty, to terminate from September 2020 . The
Canaveral Drive lease has a biennial inflationary rent review clause . The Group does not have an option to
purchase the leased assets at the expiry of the lease period .
At each reporting date the Group had the following operating lease commitments:
2018 2017
$000 $000
Less than 1 year 943 891
1 to 2 years 947 903
2 to 5 years 1,553 2,215
More than 5 years - 102
Total Operating Lease Commitments 3,443 4,111
A portion of the Canaveral Drive premises lease are sub-leased on month to month terms . This results in a
reduction in rental expense . Rental income during the 2018 year totalled $56,017 (2017: $71,644) associated
with these rental agreements . The current full year rental on the Canaveral Drive property is $546,336 (2017:
$530,452) .
25 . SEGMENT INFORMATION
The Group operates in one business segment, the supply of customer communication solutions . These
include a range of integrated document management products and services separated into four streams;
outsource services, technology & development services, intelligent imaging and output services . Specific
elements of these streams are as follows:
• Software & Technology, Solution Dynamics owns the intellectual property in five products;
◊ Déjar, an online digital archival and retrieval system sold stand-alone under licence agreements and
also as a hosted service in New Zealand and Internationally .
◊ Bremy, Digital asset management, workflow and multichannel publishing software sold as a
licenced product and also as a hosted service in New Zealand, Australia and the UK .
◊ Composer, “On-Demand” content creation software .
◊ DéjarMail, is a web browser-based desktop mail management solution which allows customers to
route mail correspondence to SDL or any other service provider for printing and delivery .
◊ Jupiter is a hybrid mail application that was acquired through the purchase of the DigitalToPrint
business . The application routes data received from clients for international distribution of
communications to the destination country for print production and lodgement as local mail .
In addition to owning the intellectual property for the above products, Solution Dynamics provides
programming, consulting and design services that help clients to distribute marketing and essential
communications by mail and electronically . The provision of these services is covered under this category .
• Digital Printing & Document Handling Services, the printing of client’s information digitally using high
speed laser printers followed by the lodgement and distribution of those documents using a variety of
machine and other processes .
• Outsourced Services, not all components of Solution Dynamics’ solutions are produced internally .
External elements such as post, freight, paper and envelopes are sourced from external suppliers and
included in this service stream . Solution Dynamics has long term arrangements with a number of key
suppliers such as NZ Post for the provision of these services .

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
An overhead structure including sales, marketing and administration departments provides services for all of
the above revenue streams .
There are no reconciling items in this note due to the management information provided to the Chief
Operating Decision Maker, the CEO Nelson Siva, being compiled using the same standards and accounting
policies as those used to prepare the consolidated financial statements .

Segment Consolidated Statement of Profit or Loss
2018 2017
$000 % $000 %
Software & Technology 6,052 27% 5,066 25%
Digital Printing & Document Handling Services 6,773 30% 6,712 34%
Outsourced services 9,907 43% 8,213 41%
Total revenue 22,732 100% 19,991 100%
Less cost of sales 14,315 63% 12,274 61%
Gross margin 8,417 37% 7,717 39%
Selling, general & administration 6,144 27% 5,630 28%
Earnings before interest, tax,
depreciation & amortisation 2,273 10% 2,087 11%
Less:
Depreciation 208 1% 208 1%
Amortisation 161 1% 78 0%
Interest (5) 0% (1) 0%
Tax 577 2% 492 3%
Operating profit 1,332 6% 1,310 7%
Segment Assets
Assets are not segmented between service streams .
Information about Major Customers
Included in revenues for the Group of $22 .7 million (2017: $20 .0 million) are services revenues of $2 .80million
(2017: $2 .16 million) which arose from sales to the Group’s largest customer .
Geographical Information
The Group has customers in New Zealand, Australia and Europe .
Revenue from
External Customers Non-current Assets
2018 2017 2018 2017
$000 $000 $000 $000
New Zealand 17,604 16,658 2,434 2,008
Australia 1,111 380 - -
United States of America 62 - 140 -
Europe 3,955 2,953 1 -
Total 22,732 19,991 2,575 2,008
26 . CONTINGENT LIABILITIES
There were no contingent liabilities at reporting date for the Group (2017: $Nil) .

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
27 . CAPITAL COMMITMENTS
The Group had no capital commitments at the reporting date (2017: $Nil) .
28 . FINANCIAL INSTRUMENTS
28.1 Credit Risk
Financial instruments that potentially subject the Group to concentrations of credit risk consist principally
of trade & other receivables . The maximum credit risk is the carrying value of these financial instruments;
however, the Group does not consider the risk of non-recovery of these accounts to be material .
In the normal course of its business the Group incurs credit risk from trade receivables and transactions
with financial institutions . The Group has a credit policy, which is used to manage this exposure to credit
risk . As part of this policy, credit evaluations are performed on all customers requiring credit . The Group
does not have any significant concentrations of credit risk, excluding the single largest customer referred
to in Note 13 . This customer is not viewed as a credit risk due to trading and payment history . The Group
does not require any collateral or security to support financial instruments as it only deposits with, or loans
to banks and other financial institutions with credit ratings of no less than AA- . It does not expect the non-
performance of any obligations that are not provided for at reporting date .
28.2 Categories of Financial Instruments
2018 2017
$000 $000

Financial Financial Financial
Liabilities at Assets at Liabilities at
Loans & Amortised Amortised Amortised
Receivables Cost Total Cost Cost Total
Assets
Cash & cash equivalents (Note 10) 1,956 - 1,956 2,080 - 2,080
Trade & other receivables (Note 13) 2,902 - 2,902 2,366 - 2,366
Total Financial Assets 4,858 - 4,858 4,446 - 4,446
Total non-financial assets 3,185 2,256
Total Assets 8,043 6,702
Liabilities
Trade creditors - 1,871 1,871 - 1,428 1,428
Other current liabilities (Note 14) - 1,245 1,245 - 903 903
Borrowings (Note 17) - - - - - -
Total Financial Liabilities - 3,116 3,116 - 2,331 2,331
Total non-financial liabilities 916 852
Total Liabilities 4,032 3,183
The carrying values of the financial instruments above are equivalent to their fair values .
28.3 Maturity Date of Financial Instruments
Weighted Gross
Average Effective Less than 1 - 3 3 Months 1 - 5 Nominal Carrying
Interest Rate 1 Month Months to 1 Year Years Outflow Value
$000 $000 $000 $000 $000 $000
2018
Non-interest bearing n/a 1,623 932 220 - 2,775 2,775
1,623 932 220 - 2,775 2,775
2017
Non-interest bearing n/a 1,551 747 33 - 2,331 2,331
1,551 747 33 - 2,331 2,331

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
28.4 Interest Rates
The following table details the Group’s weighted average effective interest rates for financial liabilities at
reporting date .
2018 2017
Financial Liabilities:
Finance facility (overdraft rate) 12 .35% 12 .35%
28.5 Foreign Currency Risk Management
Hosting and license sales linked to the Group’s Software operations are denominated in foreign currency
and sold under standard terms and conditions . Any variation in exchange rate between the date of sale and
the date cash is received is accounted for as a foreign exchange gain/loss in the period in which it occurs .
For material individual transactions in foreign currencies the Group has a policy of taking forward exchange .
At 30 June 2018 of total trade receivables of $2,791,000 (2017: $2,283,000) a total of $974,000 (2017:
$470,000) was in foreign currencies . $784,000 (2017: $398,000) of the foreign currency receivables were
denominated in European currencies, $63,000 in US $ with the remainder of the balance in AUD $ .
In addition to the trade receivables of $974,000 (2017: $470,000) held in foreign currencies at the end of the
reporting period, a further $352,000 (2017: $194,000) in cash was also held in foreign currencies, a total of
$1,326,000 (2017: $664,000) . Adjusted for offsetting payables balances, a movement in the exchange rate of
10% would give rise to an exchange fluctuation of $4,700 (2017: $14,100) .
Trading operations for the UK and Europe are largely undertaken through SDL’s UK subsidiary Solution
Dynamics International Limited (SDIL) . At period end the net assets for SDIL, comprising largely working
capital, was a credit balance of NZ$110,000 (2017: NZ$36,000) with cash and receivable balances as noted
above .
At 30 June 2018, the reporting date no forward exchange contracts were held (2017: $Nil) . The Directors
believe that any sensitivity to foreign exchange risk is not material .
The foreign exchange gains or losses disclosed in Note 5 relate to trade and other receivables .
28.6 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an
appropriate liquidity risk management framework for the management of the Group’s short, medium and
long-term funding and liquidity management requirements . The Group manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities . With positive cash
inflows the Group’s liquidity risk is considered by the Directors to be low .
28.7 Interest Rate Sensitivity Analysis
Interest on finance leases is on fixed rates with no exposure to fluctuations in interest rates . There are no
borrowings associated with the finance facility as at the end of the reporting period (2017: -) .
At 30 June 2018 the interest rate on the overdraft facility was 12 .35% (2017: 12 .35%) . With a net cash
position of $1 .96 million (2017: $2 .08 million) at the end of the reporting period a material change in the
interest expense is not expected .
28.8 Capital Management
The Group manages its capital to ensure that the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balances .
Earnings in the Group has again improved on the prior year . The Group is in a net cash position of $1 .96
million (2017: $2 .08 million) and a net cash inflow from operations of $1 .63 million (2017: $1 .68 million) .
There was an operating profit of $1 .37 million in the current year (2017: $1 .31 million) and no material change
in financial performance is forecast for the 2018 year . The Group has no externally imposed covenants to
manage .

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44
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
2018 2017
$000 $000
Cash & Finance facility (Note 10) 1,956 2,080
Net cash (debt) 1,956 2,080
Equity (all capital and reserves) 4,011 3,519
Net (cash) debt to equity ratio (49%) (59%)
29 . DIRECTORS’ REMUNERATION
The following fees and salaries were paid to Directors during the reporting period:
2018 2017
$000 $000
John McMahon (Chairman) 45 45
Nelson Siva (CEO) 413 419
Mike Smith (resigned 3 November 2017) - 9
Julian Beavis 25 25
Elmar Toime 30 25
Total Directors’ Remuneration 513 523
30 . EMPLOYEE OPTIONS
On 17 February 2014 the Group announced the introduction of an equity settled employee share option plan .
The general principles of the scheme were:
• The maximum aggregate number of share options to be granted pursuant to the plan is 5% of the total
number of shares on issue .
• Options of no more than 1% of the total number of SDL’s shares on issue can be granted to an
individual staff member .
• The exercise price will be determined by the Board based on the market price at the time of issue .
• The options may be exercised by the participant (in whole or part) after three years from the date that
they are granted . The key employees have 18-months from the date of eligibility and must be employed
by SDL at the date the option is exercised .
2018 2017
Number of Number of
Shares Shares
$000 $000
Unvested shares at 1 July 580 580
Granted - -
Vested (500) -
Unvested shares at 30 June 80 580
Percentage of total ordinary shares 0 .5% 4 .1%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
The fair value of the options granted during the reporting period was $Nil (2017: $Nil) . This cost is recognised
over the vesting period .
Grant Date Options Share Price Exercise Options Option
Issued at Grant Date Price Expire Value $
March 2014 500,000 $0 .450 $0 .375 Sept 2018 $107,660
November 2015 80,000 $0 .800 $0 .700 May 2019 $29,395
The fair value was determined using a Black-Scholes option pricing model that takes into account the
exercise price, the term of the option, the share price at grant date and expected price volatility of the
underlying share, the dividend yield and the risk-free interest rate for the term of the option .
In addition to the factors as noted in the table above further inputs for the model included:
• Standard deviation of stock returns 50% . This is based on an analysis of share price movements over
the 12-months prior to the issue of the options .
• Dividend yield of 0% .
• Annual risk-free rate of 4 .08% .
32 . SHAREHOLDERS AND SUBSTANTIAL SECURITY HOLDERS
32.1 The 20 largest shareholders as at 19 July 2018 were:
Shareholder % of Total Shares
New Zealand Permanent Trustees Limited - NZCSD <NZPT43> 11 .33% 1,649,343
ASB Nominees Limited <574233 A/C> 10 .34% 1,504,801
Philip Hadfield Hardie Boys <P & K Hardie Boys Family A/C> 8 .59% 1,250,000
Indrajit Nelson Sivasubramaniam + Tracey Lee Sivasubramaniam 6 .66% 970,000
Custodial Services Limited <A/C 4> 5 .66% 823,650
Michael Charles Hare 4 .88% 710,000
Accident Compensation Corporation - NZCSD <Acci40> 4 .87% 708,500
Colin Glenn Giffney 3 .78% 550,000
Christopher Veale + Penny Veale 3 .41% 496,270
Jillian Bernadette Winstanley 2 .23% 325,000
Investment Custodial Services Limited <990025995> 1 .93% 280,881
Custodial Services Limited <A/C 3> 1 .71% 248,472
Custodial Services Limited <A/C 1> 1 .68% 245,000
Don Nominees Limited 1 .61% 234,944
Roger Dixon Armstrong 1 .59% 231,665
Deirdre Elizabeth Tallott 1 .47% 214,444
FNZ Custodians Limited <DRP NZ A/C> 1 .32% 192,143
Investment Custodial Services Limited <990027046> 1 .24% 180,000
Zealandia Associates Limited 1 .11% 162,000
Anna Lake 1 .10% 160,000
Grand Total 76.51% 11,137,113
A total of 14,559,810 shares were on issue (2017: 14,059,810) .

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46
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
Solution Dynamics Limited
32.1 Size of Shareholding as at 18 July 2018
Holdings Shareholders Shares Held % of Total
1-999 63 7,110 0 .0%
1,000-4,999 39 82,031 0 .6%
5,000-9,999 28 170,152 1 .2%
10,000-49,999 47 880,698 6 .0%
50,000-99,999 16 1,123,597 7 .7%
100,000 and over 29 12,296,222 84 .5%
TOTAL 222 14,559,810 100.0%
32.2 Substantial Security Holders
According to notices given under the Financial Markets Conduct Act 2013, the following persons were
substantial shareholders in Solution Dynamics Limited as at 21 July 2018:
Shareholder % of Total Shares
New Zealand Permanent Trustees Limited (The Aspiring Fund) 11 .33% 1,649,343
Meta Capital Limited (John McMahon) 10 .34% 1,504,801
Philip Hadfield Hardie Boys (P & K Hardie Boys Family A/C) 8 .59% 1,250,000
Indrajit Nelson Sivasubramaniam & Tracey Lee Sivasubramaniam 6 .66% 970,000
Michael Charles Hare (& others) 5 .08% 740,000
33 . BUSINESS COMBINATIONS
During the year ended 30 June 2018, the Group acquired the business and assets of Auckland-based
scanning services and technology provider Scantech Limited (Scantech) acquired 1 April 2018 and of United
States-based technology company DigitalToPrint Inc . and its related companies (DTP) acquired 1 May 2018
for an aggregate purchase consideration of $1 .05 million .
The Company obtained full control of these businesses by acquiring the assets of the Company, including
property leases and some staff .
The acquisition includes contingent consideration determined by the Directors to be $335,000 based upon
achieving sales targets within 12-months of acquisition date . The range of possible contingent consideration
is nil to $1 .21 million .
Details of the assets and liabilities acquired for these acquisitions are as follows:
$000
Purchase Consideration
Cash paid during the period 712
Estimate of earnout related to acquisitions (payable within 12-months of acquisition) 335
Total Estimated Consideration 1,047
Fair value of assets arising from the acquisitions -
Property plant and equipment 75
Intangible assets software 531
Intangible assets customer contracts 441
Goodwill – arising on deferred tax 123
Less liabilities assumed:
Deferred tax liability on customer contracts (123)
Total 1,047

|
47
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June 2018
The contribution of these businesses to the Group results for the year ended 30 June 2018 was revenue of
$248,000 and an operating loss before interest, income tax and amortisation of intangibles of $60,000 . Legal
and other costs incurred during the year ended 30 June 2018 related to these acquisitions (note 5) totalled
$118,000, these are non-deductible for tax purposes .
Had the business combinations taken place at the beginning of the accounting period 1 July 2017, Group
revenues would have increased to $25 .4 million and profit before income tax would have been $1 .8 million .
34 . EVENTS AFTER THE REPORTING DATE
On 30 August 2018, the directors approved the payment of a fully imputed dividend of 3 .50 cents per share
amounting to $509,593 to be paid on 21 September 2018 (2017: The directors approved the payment of a
fully imputed dividend of 3 .25 cents per share, amounting to $456,944 .

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Nature of Business
Data management, electronic digital printing, document distribution, web presentment and archiving,
fulfilment, print services, scanning, data entry and document management .
Directors
John McMahon – Chairman
Elmar Toime
Julian Beavis
Indrajit Nelson Sivasubramaniam (Nelson Siva) –
Chief Executive Officer

Auditors
Grant Thornton New Zealand Audit Partnership
Grant Thornton House
152 Fanshawe Street
AUCKLAND
Bankers
ANZ National Bank Limited
Level 20, ANZ Centre
23 - 29 Albert Street
AUCKLAND
Legal Representative
Stephen Layburn
Commercial Barrister
Level 3, 175 Queen Street
AUCKLAND
Share Registry
Computershare Investor Services
Level 2, 159 Hurstmere Rd
Takapuna
AUCKLAND
Private Bag 92119
Auckland Mail Centre
AUCKLAND 1142
Registered Office and address for service
18 Canaveral Drive
Albany
AUCKLAND
PO Box 301248
Albany
AUCKLAND 0752
Tel: +64 (9) 970-7700
Solution Dynamics (International) Limited
Lancaster Court, 8 Barnes Wallis Road,
Fareham, PO15 5TU
Hampshire
UNITED KINGDOM
Tel: +44 1489 668219
Solution Dynamics Incorporated
260 Madison Avenue, 8th floor
New York, New York 10016
UNITED STATES of AMERICA
Tel: +1 (917) 319 5625
Déjar International Limited
18 Canaveral Drive
Albany
AUCKLAND
PO Box 301248
Albany
AUCKLAND 0752
Tel: +64 (9) 970-7700

COMPANY DIRECTORY

|
51
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SOLUTION DYNAMICS
ON THE WEB
www.solutiondynamics.com
www.dejar.com
www.bremy.com
www.digitaltoprint.com
www.scantech.co.nz

www.solutiondynamics.com

---

Reporting Period12 months to 30 June 2018
Previous reporting period12 months to 30 June 2017
Amount NZ$ 000'sPercentage change
$22,732Up by 13.7%
$1,332Up by 1.7%
$1,323Up by 0.92%
Amount per securityImputed amount
Final$0.03500$0.01361
17 September 2018
21 September 2018
FY2018FY2017
$0.39856$0.38905
Dividend payment date
Comments
Net Tangible Assets per Share
Please read this in conjunction with the attached results release and audited
financial statements for the 12 months ended 30 June 2018.
Interim / Final Dividend
Solution Dynamics Limited (SDL)
Results for announcement to market
Revenue from ordinary activities
Profit (loss) from ordinary activities after tax attributable to security holder
Net profit (loss) attributable to security holders
Record Date

---

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Amount per securityPayment
(does not include any excluded income)
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(only applicable to listed PIEs)
SupplementaryAmount per security
Currencydividendin dollars and cents
details -
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Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
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issue state strike priceWithholding Tax(Give details)
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Notice DateAllotment Date
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conversion notices mailedMust be within 5 business days
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OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
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Cease Quoting Old Security 5pm:
17 September 201821 September 2018
$$0.002431$0.013611
$
NZ$
$509,593
Date Payable
Enter N/A if not
applicable
NZSDLE0001S8
In dollars and cents
RETAINED EARNINGS
$0.0350
ORDINARY SHARES
+ 64 9 970 7781+64 9 970 780030082018
EMAIL: announce@nzx.com
Notice of event affecting securities
SOLUTION DYNAMICS LIMITED
CHRIS VEALEDIRECTORS RESOLUTION