SDL Interim FY2019 Reporting

For the six months ended 31 December 2018
Interim Report
Simplifying Business

HIGHLIGHTS FOR
SIX MONTHS TO
31 DECEMBER 2018
Net profit after tax declines
77% to $192,000
Decline of 42% adjusted for impact of acquisitions
Software & technology revenues
grow 29% to $3.8 million
EBITDA declines 56% to

$0.58 million
Cash flow from operations
declines $657,000 to $170,000
Interim dividend of 2.0 cents

per share (down 2.0 cents)
December achieved first major
win in US for Hybrid Mail /
DéjarMail solution
A decline of around 25% to 35%
is forecast for FY2019 profit
(NPAT)
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CONTENTS
Highlights for Six Months to 31 December 2018 . . . . . . . . . . . . . . .2
Chairman’s & Chief Executive Officer’s Report . . . . . . . . . . . . . . . .4
Condensed Consolidated Financial Statements
> Consolidated Statement of Profit or Loss (Unaudited) . . . . . . . . . . .12
> Consolidated Statement of Comprehensive Income (Unaudited) . . .13
> Consolidated Statement of Changes in Equity (Unaudited) . . . . . . .14
> Consolidated Statement of Financial Position (Unaudited) . . . . . . . .15
> Consolidated Cash Flow Statement (Unaudited) . . . . . . . . . . . . . . .16
> Notes to the Condensed Financial Statements (Unaudited) . . . . . . . .18
Company Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

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Result Introduction
The Company was expecting FY2019 to be a difficult year for three main reasons:
1 . NZ Post postage price changes pushing customers into faster switching to digital
communications, eroding gross margins in traditional print/mail side of the business;
2 . Higher costs, particularly to support Software and international growth, coupled
with the conclusion of NZTE cost support in the UK during FY2018; and
3 . Net losses from acquisitions made in the second half of FY2018 .
These factors have proved somewhat stronger than we initially estimated and
consequently, SDL’s result is not only well down on the prior year but also lagging
internal budgets . To the above reasons can be added some unexpected client losses as
several customers consolidated their printing into a single supplier (SDL was only a small
portion of those customers’ print activity) .
Much of the earnings pressure emanates from SDL’s domestic NZ operations .
Clearly, the Company has been reactive to this greater local margin pressure and has
significantly restructured NZ print and mail operations to reduce costs . However, cost
cutting is a game with a finite number of moves and the ongoing trend of erosion to
physical print and mail volumes will not abate .
Fortunately, the Company is continuing to see very strong growth with its international
software and arguably has the strongest prospective pipeline in its history . Both
DéjarMail and DTP’s Jupiter platform are generating broad interest . But pipelines don’t
pay any bills and there is significant pressure to execute in closing sales over 2019 . The
negative domestic forces are proving stronger than the positive international software
forces in FY2019, however, irrespective of whether SDL is successful with some of the
larger sales opportunities currently in play, the level of software wins achieved to date,
coupled with ongoing growth from existing software customers, means – subject to the
risk of an unexpected major customer loss – the Directors are reasonably confident of a
return to earnings growth in FY2020 .
Result Overview
Solution Dynamics Limited (“SDL” or “Company”) produced an unaudited net profit after
tax of $0 .192 million for the half year (1H FY18 $0 .832 million), a decline of 77% . This fall
in profit stems from a variety of factors including the impact of losses from acquisitions,
increased amortisation resulting from acquisitions, postage price increases causing a
tougher domestic print and mailing market, and much higher UK costs . The effect of these
factors is detailed more fully in the Financial Performance section, which highlights that
even on a like-for-like basis, adjusting for the effect of acquisitions, earnings declined .
Cash flow from operations was $0 .170 million (1H FY18 $0 .827 million) and the closing
net cash position at 31 December was $1 .39 million (1H FY18 $2 .41 million) . The Directors
have declared an interim dividend of 2 .0 cents per share (1H FY18 4 .0 cents), fully imputed .
CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT
SDL typically has a seasonal earnings pattern that is stronger in the first half of the
financial year . This is not expected to be the case in FY2019, given the timing of
additional costs, acquisition losses from DTP skewed towards the first half, and
new business revenue and pipeline strongly biased towards the second half .
Operational Commentary
Operating revenue grew 12 .7% to $12 .73 million . As usual, there were revenue
gains in low margin postage revenue and subcontracted printing in the UK where
SDL earns low margins . NZ domestic print and mail volumes are under increasing
pressure, with digital print and document handling revenue declining 10 .9% year-on-
year . The consequence of SDL’s changing revenue mix – particularly the pressure on
higher margin local print and mail volumes, more on that below – was a drop in the
Company’s gross margin percentage from 37 .3% to 32 .87% (although dollar gross
margin largely held, down 0 .8% to $4 .18 million) . Costs in general continue to be
well managed, although Selling, General & Administration costs rose 24 .5% with the
increase coming from both the effect of acquisitions as well as SDL adding additional
resource for Software development and support, particularly in the UK .
Software & Technology revenues continue to show gains, increasing by 28 .5% to
$3 .78 million (1H FY18 $2 .93 million), as the Company’s UK revenues in particular
continue to build . SDL’s UK channel partners are increasingly gaining sales traction .
The acquisition of DTP has opened a broad range of material sales opportunities in
the US, with one medium sized new client added late in 2018 .
As noted above, the traditional digital print and document handling services market
revenue declined 10 .9% year-on-year to $3 .01 million (1H FY17 $3 .38 million) .
Anecdotally, the pace of overall decline in market volumes has accelerated and
SDL is not immune to this trend . The Company has historically gained market share
at a faster pace than customers have been switching to electronic communications
channels, however, the loss of several clients to integrated print providers saw this
position reverse during the half (and the impact will be felt to a greater degree in the
second half and fully in FY2019) . The first half saw an ongoing increase in the rate
at which customers switched to electronic communications, with mail lodgements
down 14 .4% and email volumes up 37 .5% . While the gross margin percentage for
handling emails is higher than print, the gross margin dollar value per email that
SDL earns is lower and consequently this increase in switching is acting as a net
drag on the Company’s earnings .
As a result of this volume and margin pressure, the Company undertook a cost
reduction restructuring exercise that started in late 2018 and has progressed
through early 2019 . This has regrettably affected a number of staff and placed
some pressure on the organisation generally but is forced on SDL by external
industry trends . The Directors particularly thank staff for their assistance and

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
efforts during what is inevitably a difficult process . While we have reduced costs in the
traditional part of the business, the growth in Software and Technology revenues and
the requirement to support a broader range of customers and software solutions has
meant additional staff have been added to support this growth .
The Company is seeing increasing interest in its software technology in the UK and
Europe, particularly DéjarMail, and more recently DTP . Mail resellers are attracted to
DéjarMail as a means of capturing desktop mail volumes, a fragmented sector of the
mail market they have historically been unable to access . SDL now has two large mail
resellers in the UK and is seeing solidly growing volumes through these channels .
Additional sales pipeline interest is being generated by distributed print solutions (the
technology SDL acquired through DTP) and also for scanning solutions (the technology
acquired through Scantech) as a result of tighter European privacy regulations .
Financial Performance
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 56%
to $0 .58 million (1H HY18: $1 .32 million) on sales revenue that rose 12 .7% .
Summary Financial Performance
Yr-on-Yr Yr-on-Yr
(all figures $000)
1H FY19 1H FY18 $ Change % Change
Total Revenue 12,726 11,292 1,434 12.7%
Cost of Goods Sold 8,547 7,080 1,467 20 .7%
Gross Margin 4,179 4,212 (33) -0 .8%
Gross Margin (%) 32 .8% 37 .3%
Selling, General & Admin Costs 3,597 2,888 709 24 .5%
EBITDA 582 1,324 (742) -56.0%
EBITDA Margin (%) 4.6% 11.7%
Depreciation 109 102 7 6 .9%
Amortisation 173 53 120 226 .4%
EBIT 300 1,169 (869) -74.3%
Net Interest (3) (2) (1) n .a .
Net Profit before Tax 303 1,171 (868) -74.1%
Taxation 111 339 (228) -67 .3%
Net Profit after Tax 192 832 (640) -76.9%

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
The EBITDA decline stems from two factors . The first is a broadly flat Gross
Margin dollar result . This is partly a sales mix issue; the table below highlights that
around two-thirds of revenue growth came in the very low margin Outsourced
Services revenue line, which includes postage . Postage in New Zealand has
always been low margin, however, aggressive price hikes by NZ Post from 1 July
2019 along with changes to qualifying rules for postage rebates to mail houses
further eroded margins . Arguably the greater impact to SDL from NZ Post’s price
increases was to exacerbate the rate at which the Company’s customers switched
from physical print towards electronic communications . This mix change from
physical to electronic in volumes, combined with the inherent operating leverage
in SDL’s print and physical mail operations caused margin pressure . The Company
has responded with a cost reduction programme, however, the usual lags in
implementation mean that the lower cost structure will only show benefit from early
in the second half of the financial year .
The second cause of lower EBITDA is higher SG&A costs . This has been caused
by three main factors: no further NZ Trade and Enterprise (“NZTE”) reimbursement
of part of the Company’s UK market development costs (the NZTE support
programme expired at the end of FY2018); additional sales and support personnel
in the UK and Europe to support Software growth; and the addition of overheads in
relation to acquisitions made during the second half of FY2018 .
The acquisition of DTP has also had a negative financial effect although the
Company expects this position will progressively abate during the second half
of FY2019 . However, until SDL can obtain traction with its US sales pipeline
opportunities, North America is likely to remain a drag on EBITDA .
SDL’s taxation rate in 1H FY2018 was 36 .6% versus 28 .9% in the prior period .
The Company is paying tax at the full rate on both New Zealand and UK earnings
but incurring losses in the US . These US losses are not able to be grouped for tax
purposes so skew the reported tax rate above the NZ and UK statutory rates . This
position will persist until the US becomes profitable .
Revenue Analysis
Yr-on-Yr Yr-on-Yr
(all figures $000)
1H FY19 1H FY18 $ Change % Change
Software & Technology 3,770 2,933 837 28 .5%
Digital Print & Document Handling 3,012 3,381 (369) -10 .9%
Outsourced Services 5,944 4,978 966 19 .4%
Total Revenue 12,726 11,292 1,434 12.7%

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
The 28 .5% growth rate for Software & Technology revenue streams in the first half
was a pleasing acceleration in the rate of growth (growth for 1H FY18 was 21 .0%) .
SDL’s pipeline of opportunities and sales efforts in the UK, European and US markets
are likely to ensure Software & Technology has a number of years of revenue growth
ahead . The Company is still overly reliant on direct sales efforts by a couple of key
staff and a small number of customers in the UK . SDL’s small scale and geographic
distance from our most important growth markets continues to place pressure on
management resources . At some point SDL will require a step change in costs for both
greater management and materially larger in-market sales presence in the UK and
North America .
Digital print in 1H FY2019 was extremely problematic, largely as a result of NZ
Post price increases and the resulting increased rate of switching to electronic
communications noted above . The industry has excess digital print capacity and
rationalisation will inevitably occur; the Company has held discussions with several
market participants, however, to date we have found a general reluctance to be the first
mover in structural industry change .
Acquisitions Performance
The acquisitions of Scantech and DTP in late FY2018 were an aggregate net drag on
profitability in the first half of FY2019, with a small Scantech gain being well offset
by the DTP deficit . As the following table shows, they collectively incurred operating
losses of $0 .174 million (pre-amortisation) and a further $0 .115 million in amortisation
charge, for a total drag of $0 .289 million to earnings .
Adjusted Profit (before Acquisitions)
Yr-on-Yr Yr-on-Yr
(all figures $000)
1H FY19 1H FY18 $ Change % Change
Reported Net Profit after Tax 192 832 (640) -76 .9%
Add back Acquisition costs 0 0
Add back Acquisition Losses (excl Amort) 174 0
Add back Acquisition Amortisation costs 115 0
Net Profit before Acquisitions 481 832 (351) -42.2%
Given the earnings losses to date, from DTP in particular, it is reasonable for investors
to understand why the Company undertook the acquisition . Firstly, DTP was incurring
losses when it was acquired by SDL and the extent of those losses was a factor in
the amount SDL paid to acquire the business and the structure of the earn-out . SDL’s
directors and management were aware of the likely risk that the losses would continue
for some time .

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
Secondly, the key asset SDL acquired was DTP’s Jupiter platform . This is a
software platform that links into a global network of printers and allows globally
distributed print instead of home country printing and international mailing .
This lowers the combined print and mail cost as well as shortening the time for
communications to reach end customers; Jupiter appeared a complementary add
on product to broaden SDL’s existing suite of communication-enabling software .
Thirdly, from discussions with various international users of SDL’s existing software,
there seemed to be genuine demand for a Jupiter-like service and there were not
any obvious competing offerings . It seemed probable that the small size of DTP (a
three person company) meant that even with a good product, DTP simply did not
have broad sales or distribution channels to market . Lastly, it seemed probable that
owning Jupiter would open incremental doors to a range of customers that SDL
would not otherwise access .
Our view from the time of acquisition is broadly unchanged . While losses have
been somewhat greater than we initially expected, the new opportunities that DTP
is generating are, to date, proving far greater than we anticipated . The December
2018 announcement of a new contract with a US-based multinational provider of
marketing communication services to SMEs was a direct result of having Jupiter as
the integral part of an overall communications solution . The magnitude of DTP-
related sales pipeline is exceptionally material in scale to SDL’s prospects; the task
ahead is to convert this pipeline into contracts .
Balance Sheet, Liquidity and Debt
SDL closed the half year with net cash on hand of $1 .39 million, down 43% on 1H
FY2018 ($2 .41 million) . A bank overdraft facility of $0 .2 million remains in placed
but is unused . Capital expenditure was $0 .23 million in the half, largely for upgrades
to the Company’s mailing equipment and financial reporting systems .
Selected Balance Sheet and Cashflow Figures
Yr-on-Yr Yr-on-Yr
(all figures $000)
1H FY19 1H FY18 $ Change % Change
Net Cash on Hand (net of debt) 1,385 2,408 (1,023) -42 .5%
Non-current Assets 2,811 1,959 852 43 .5%
Net Other Liabilities (482) (398) (84) 21 .1%
Net Assets 3,714 3,969 (255) -6.4%
Cashflow from Trading 503 968 (465) -48 .0%
Movement in Working Capital (333) (141) (192) 136 .2%
Cash Inflow from Operations 170 827 (657) -79.4%

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
Book value (net assets) declined by 6 .4% to $3 .71 million, the result of lower
earnings in the first half coupled with the accounting reduction to retained earnings
from payment of the final FY2018 dividend . Working capital remains reasonably
well managed although the negative movement in working capital was slightly
higher than expected .
Given a focus on ensuring value is obtained from the two acquisitions made in the
second half of FY2018, the Company is not currently examining any acquisition
opportunities . SDL remains interested in opportunities that will inevitably result
from domestic mail and print industry restructuring, however, there are only a small
number of transactions that would make sense for the Company, and any deal
would need to be value adding for shareholders .
Dividend
SDL is declaring an interim dividend of 2 .0 cents per share, a 50% reduction on the
prior year .
Earnings and Dividend per Share
Yr-on-Yr Yr-on-Yr

1H FY19 1H FY18 Change % Change
Shares on Issue (000) 14,559 .8 14,249 .8 310 .0 2 .2%
Earnings per share (cents) 2.51 6.21 (3.70) -59.6%
Dividend per share (cents) 2.00 4.00 (2.00) -50.0%
Dividend proportion Imputed 100 .0% 100 .0% n .a . n .a .
Payout ratio 79 .8% 64 .4% n .a . n .a .
The dividend is fully imputed and the amount represents a payout ratio of 79 .8%
of earnings per share . A new market development agreement with NZTE (details in
FY2019 Outlook section below) will limit SDL to paying future dividends to a limit of
75% of NPATA (Net profit after tax but before amortisation) across any financial year .
Migration to NZX Main Board Listing
The process of moving from the NZAX to the main board is well underway and
the Directors have now approved the draft governance and policy documents and
draft constitution . A further announcement on this process is expected shortly . The
Directors remain conscious of the limited liquidity in trading of SDL shares and will
review trading liquidity following the transfer to the NZX Main Board .

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CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
FY 2019 Outlook
Two trends will influence the second half outlook and the relative timing and
strength of these may cause actual results to vary from expectations to a
greater degree than usual . The first is the loss of several domestic contracts that
progressively occurs during 2H, partly offset by an internal restructuring to lower
costs associated with print and mail operations . The second – more variable effect
– is the growth of international Software and Technology revenue, where a number
of new or trial contracts and development projects commence during 2H .
In February 2019, SDL was approved by NZTE for a further contract for market
development costs to support for the Company’s US expansion efforts . This will be
a three year agreement that is similar in nature to SDL’s prior NZTE agreement for
UK market development . To ensure the Company retains adequate internal funding
for US growth, the new NZTE agreement will also cap SDL’s dividend payout
ratio at 75%, although in recognition of the fact that acquisitions have added
significantly to non-cash amortisation charges against profit, the payout ratio cap is
now applied to net profit after tax but before amortisation (NPATA) .
The acquisition of DTP has broadened SDL’s pipeline of opportunities significantly,
as noted above, both geographically into the US and in terms of the number
of potential clients seeking a distributed print solution . The Directors note that,
irrespective of how the 2H earnings volatility eventuates, should SDL succeed in
closing some of the current larger prospects, particularly those related to DTP/
Jupiter, then FY2020 earnings growth may be very material .
SDL has previously provided FY2019 guidance for earnings decline of around
15% . Following the first half result, and considering cost and gross margin
pressures, plus the Software pipeline, are revising the full year outlook down to
an expected reported earnings decline of around 25% to 35% . The caveat to the
full year forecast is that timing and success around the Software and Technology
opportunities during 2H introduces a higher-than-usual degree of volatility (both
upside and downside) to this outlook .
John McMahon Nelson Siva
Chairman Director & Chief Executive Officer
+61-410-411 806 +64-21-415027

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CONSOLIDATED STATEMENT
OF PROFIT OR LOSS (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
(NZ$ in thousands, except per share amounts)
Operating revenue 12,600 11,095 22,383
Grant income 119 162 293
Property rental 7 35 56
Total income 12,726 11,292 22,732
Expenses
Employee costs 3,070 2,711 5,630
Rental and operating lease expenses 406 352 715
Research & development 370 170 473
Directors fees & salaries 310 300 513
Print & other outsource expenses 5,311 4,469 8,826
Other expenses 2,677 1,966 4,302
Total Expenses 12,144 9,968 20,459
Earnings before interest, tax,
depreciation & amortisation (EBITDA) 582 1,324 2,273
Depreciation 109 102 208
Amortisation of intangible assets (software) 173 53 161
Net Interest (income) (3) (2) (5)
Profit before income tax 303 1,171 1,909
Income tax 111 339 577
Net profit after income tax 192 832 1,332
Cents Cents Cents
Basic earnings per share 1 .3 5 .8 9 .3
Diluted earnings per share 1 .3 5 .7 9 .1
6 MONTHS
ENDED
31 DEC
2018
6 MONTHS
ENDED
31 DEC
2017
AUDITED
YEAR ENDED
30 JUN
2018

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CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
(NZ$ in thousands, except per share amounts)
Net operating profit after income tax 192 832 1,332
Exchange differences on translation
of foreign operations 14 (5) (9)
Other comprehensive income for the period,
net of tax 14 (5) (9)
Total comprehensive income for the year 206 827 1,323
6 MONTHS
ENDED
31 DEC
2018
6 MONTHS
ENDED
31 DEC
2017
AUDITED
YEAR ENDED
30 JUN
2018

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(NZ$ in thousands)
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
Balance 1 July 2017 5,169 113 1 (1,764) 3,519
Issue of shares to employees - 9 - 9
Exercise of employee options 71 (36) - 36 71
Transactions with owners 71 (27) - 36 80
Dividend - - - (457) (457)
Profit for the year after tax - - 832 832
Other comprehensive income - - (5) - (5)
Total comprehensive income - - (5) 375 370
Balance 31 December 2017 5,240 86 (4) (1,353) 3,969
Issue of shares to employees - 14 - - 14
Exercise of employee options 117 (72) - 72 117
Transactions with owners 117 (58) - 72 131
Dividend - - - (585) (585)
Profit for the year after tax - - 500 500
Other comprehensive income - - (4) - (4)
Total comprehensive income - - (4) (85) (89)
Balance 30 June 2018 (Audited) 5,357 28 (8) (1,366) 4,011
Issue of shares to employees - 8 - 8
Exercise of employee options - - - - -
Transactions with owners - 8 - - 8
Dividend - - - (511) (511)
Profit for the year after tax - - 192 192
Other comprehensive income - - 14 - 14
Total comprehensive income - - 14 (319) (305)
Balance 31 December 2018 5,357 36 6 (1,685) 3,714
SHARE
CAPITAL
EMPLOYEE

SHARE
PLAN
CURRENCY

TRANSLATION
RESERVE
ACCUM-

ULATED
LOSSES
TOTAL
EQUITY

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CONSOLIDATED STATEMENT OF
FINANCIAL POSITION (UNAUDITED)
AS AT 31 DECEMBER 2018
Current Assets
Cash and bank balances 1,385 2,408 1,956
Trade & other receivables 2,634 2,214 2,902
Inventories and work in progress 270 156 183
Prepayments 251 182 131
Total Current Assets 4,540 4,960 5,172
Current Liabilities
Trade creditors 1,885 1,517 1,871
Other current liabilities 826 625 1,245
Other non-financial liabilities 398 388 444
Employee benefit Liabilities 528 420 472
Total Current Liabilities 3,637 2,950 4,032
Working Capital 903 2,010 1,140
Non-Current Assets
Deferred tax asset (10) 99 (24)
Capital works in progress 116 4 61
Property, plant & equipment 648 603 594
Intangible assets 1,020 315 1,179
Goodwill 1,037 938 1,061
Total Non-Current Assets 2,811 1,959 2,871
Net Assets 3,714 3,969 4,011
Equity
Share capital 5,357 5,240 5,357
Employee share option plan 36 86 28
Foreign currency translation reserve 6 (4) (8)
Accumulated losses (1,685) (1,353) (1,366)
Total Equity 3,714 3,969 4,011
For and on behalf of the Board
John McMahon – Director (Chairman) Nelson Siva – Director
Date: x xxxxx 2019
AS AT
31 DEC
2018
AS AT
31 DEC
2017
AUDITED
AS AT
30 JUN
2018
(NZ$ in thousands)

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6 MONTHS
TO 31 DEC
2017
AUDITED
YEAR TO
30 JUN
2018
CONSOLIDATED CASH FLOW STATEMENT
(UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
Cash Flow from Operating Activities
Cash was provided from:
Receipts from sales 14,744 12,766 25,041
Other revenue 119 162 293
14,863 12,928 25,334
Cash was applied to:
Payments to suppliers 9,960 8,254 15,830
Payments to employees 4,036 3,212 6,621
GST paid to Inland Revenue 697 635 1,261
14,693 12,101 23712
Net Cash Inflow from Operating Activities 170 827 1,622
Cash Flow from Investing Activities
Cash was applied to:
Purchase of property, plant & equipment
& capital works in progress 219 41 120
Purchase of software 14 74 68
Payments for businesses acquired - - 712
233 115 900
Net Cash (Outflow) from Investing Activities (233) (115) (900)
Cash Flow from Financing Activities
Cash was provided from:
Exercise of employee share options - - 188
Interest received 3 2 5
Issue of shares through employee option plan - 71 -
3 73 193
Cash was applied to:
Payment of dividends 511 457 1,039
Interest paid - - -
Repayments for term loan & finance
lease liabilities secured on equipment - - -
511 457 1,039
Net Cash (Outflow) from Financing Activities (508) (384) (846)
Net change in cash and cash equivalents (571) 328 (124)
Add cash & cash equivalents held at
beginning of year 1,956 2,080 2,080
Finance Facility and Cash Balance at End of Year 1,385 2,408 1,956
(NZ$ in thousands)
6 MONTHS
TO 31 DEC
2018

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6 MONTHS
TO 31 DEC
2017
AUDITED
YEAR TO
30 JUN
2018
CONSOLIDATED CASH FLOW STATEMENT
CONTINUED (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
Reconciliation of net deficit after income tax
for the year with net cash inflow/ (outflow)
from operating activities
Net (deficit)/surplus after income tax 192 832 1,332
Interest expense (reclassified as financing activity) - - -
Interest income (reclassified as financing activity) (3) (2) (5)
Add non-cash items:
Depreciation & amortisation of assets 283 155 369
(Gain) / Loss on foreign exchange (1) (30) (39)
Other non-cash items 32 13 20
Cash Flow from Trading 503 968 1,677
Add movements in Working Capital (333) (141) (55)
Net Cash Inflow from Operating Activities 170 827 1,622
(NZ$ in thousands)
6 MONTHS
TO 31 DEC
2018

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NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
For the six months ended 31 December 2018
1. GENERAL INFORMATION AND BASIS OF PREPARATION
The condensed interim consolidated financial statements (the interim financial
statements) are for the six months ended 31 December 2018 and are presented
in NZ$, which is the functional currency of the parent company . They have been
prepared in accordance with New Zealand generally accepted accounting practice
and comply with New Zealand Equivalent to International Accounting Standard
34 (NZIAS34) and IAS 34 “Interim Financial Reporting” (IAS34) . They do not
include all of the information required in annual financial statements in accordance
with IFRS’s, and should be read in conjunction with the consolidated financial
statements for the year ended 30 June 2018 .
Solution Dynamics Limited is the Group’s ultimate parent company . It is a limited
liability public company incorporated and domiciled in New Zealand and is listed
with the New Zealand Stock Exchange on the NZAX . The address of its registered
office and principal place of business is 18 Canaveral Drive, Auckland, New
Zealand .
The Group comprises Solution Dynamics Limited and its wholly owned subsidiaries
Solution Dynamics (International) Limited (based in the United Kingdom), Solution
Dynamics Incorporated (based in the United States of America) and Déjar
International Limited (non-trading) .
The Group offers a range of integrated solutions encompassing data management,
electronic digital printing, web presentment and archiving, fulfilment, traditional
print services, scanning, data entry and document management .
The interim financial statements for the six months ended 31 December 2018 and
the related comparative interim period, are unaudited . Due to seasonal variability
financial information from the audited financial statements for the immediate
preceding financial year ending 30 June 2018 have also been included .
The unaudited interim financial statements for the Group for the six months ended
31 December 2018 were authorised for issue on 28 February 2018 in accordance
with a resolution of the directors of the Company .

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NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
For the six months ended 31 December 2018
2. SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements have been prepared in accordance with the
accounting policies adopted in the Group’s most recent annual financial statements
for the year ended 30 June 2018 .
3. ESTIMATES
When preparing the interim financial statements, management undertakes a
number of judgements, estimates and assumptions about recognition and
measurement of assets, liabilities, income and expenses . The actual results may
differ from the judgements, estimates and assumptions made by management, and
will seldom equal the estimated results .
The judgements, estimates and assumptions applied in the interim financial
statements, including the key sources of estimation uncertainty were the same as
those applied in the Group’s last annual financial statements for the year ended 30
June 2018 . The only exception is the estimate of the provision for income taxes
which is determined in the interim financial statements using the estimated average
annual effective income tax rate applied to the pre-tax income of the interim period .
4. 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 .

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS CONTINUED (UNAUDITED)
For the six months ended 31 December 2018
»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 .
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 being compiled using the
same standards and accounting policies as those used to prepare the financial
statements .

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21
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS CONTINUED (UNAUDITED)
For the six months ended 31 December 2018
6 months to 6 months to Year to
(NZ$ in thousands) December 2018 December 2017 June 2018
Software & Technology 3,770 30% 2,933 26% 6,052 27%
Digital Printing & Document
Handling Services 3,012 24% 3,381 30% 6,773 30%
Outsourced services 5,944 46% 4,978 44% 9,907 43%
Total income 12,726 100% 11,292 100% 22,732 100%
Less cost of sales 8,547 67% 7,080 63% 14,315 63%
Gross margin 4,179 33% 4,212 37% 8,417 37%
Selling, general &
administration 3,597 28% 2,888 26% 6,144 27%
Earnings before interest,
tax, depreciation
& amortisation 582 5% 1,324 11% 2,273 10%

Depreciation 109 1% 102 1% 208 1%
Amortisation 173 1% 53 0% 161 1%
Interest (3) 0% (2) 0% (5) 0%
Income tax 111 1% 339 3% 577 2%
Operating Profit
after income tax 192 2% 832 7% 1332 6%
Segment Assets
Assets are not segmented between service streams
Information about Major Customers
Included in revenues for Solution Dynamics of $12 .726 million (2017: $11 .292
million) are services revenues of $1 .513 million (2017: $1 .255 million) which arose
from sales to the Company’s largest customer .
Geographical Information
The Group has customers in New Zealand, Australia and Europe .

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22
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Revenue from external customers Non-current assets
6 months 6 months Year to As at As at As at
to 31 Dec to 31 Dec 30 June 31 Dec 31 Dec 30 June
(NZ$ in thousands) 2018 2017 2018 2018 2017 2018
New Zealand 9,387 9,331 17,604 2,802 1,959 2,870
Australia 312 218 1,111 - - -
United States of America 401 - 62 -
Europe 2,626 1,743 3,955 9 - 1
Total 12,726 11,292 22,732 2,811 1,959 2,871
5. CASH & CASH EQUIVALENTS
As at As at As at
31 Dec 31 Dec 30 Jun
(NZ$ in thousands) 2018 2017 2018
Cash and cash equivalents 1,385 2,408 1,956
Total Finance Facility and Cash 1,385 2,408 1,956
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 .
NOTES TO THE CONDENSED FINANCIAL STATEMENTS CONTINUED (UNAUDITED)
For the six months ended 31 December 2018

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6. SHARE CAPITAL & SHARE-BASED PAYMENTS
Solution Dynamics Limited has 14,559,810 ordinary shares (2017 14,249,810
ordinary shares) each fully paid .
The Group operates equity-settled, share-based compensation plans, under which
employees provide services in exchange for non-transferable options . The value
of the employee services rendered for the grant of non-transferable options is
recognised as an expense over the vesting period, and the amount is determined
by reference to the fair value of the options granted .
Number of Shares As at As at As at
31 Dec 31 Dec 30 Jun
(
Shares in $000’s) 2018 2017 2018
Shares Issued and Fully Paid:
- Beginning of the Period 14,560 14,060 14,060
- Share Issue (exercise of options) - 190 500
Shares Issued and Fully Paid 14,560 14,250 14,560
Employee Share Option Plan:
- Beginning of the Period 80 580 580
- Options issued - - -
- Options exercised - (190) (500)
- Options forfeited - - -
Shares Authorised for Share-based Payments 80 390 80
Total Shares Authorised at the end of the Period 14,640 14,640 14,640
The 80,000 options outstanding (2017: 390,000) were at a weighted average
exercise price of $0 .70 (2016: $0 .44) . 80,000 options are eligible to be exercised
now with an expiry date of September 2019 .
NOTES TO THE CONDENSED FINANCIAL STATEMENTS CONTINUED (UNAUDITED)
For the six months ended 31 December 2018

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7. RELATED PARTIES
Transactions between related parties include payments to shareholders, directors
and their companies and senior executives, also being shareholders .
Related party transactions from 1 July 2018 to 31 December 2018 were as follows:
• Key management were paid $424,216 (as employees of Solution
Dynamics Limited) during the period (2017: $421,228) and were owed
$68,176, including annual leave, at 31 December 2018 (2017: $46,301) .
• Salaries paid to directors are disclosed in the Consolidated Statement of
Comprehensive Income .
8. EVENTS AFTER THE BALANCE DATE
At the board meeting of 28 February 2019, the directors resolved to pay a fully
imputed interim dividend of 2 .0 cents per share, amounting to $291,196 (2017: the
directors approved the payment of a fully imputed interim dividend of 4 .0 cents per
share, amounting to $569,992) . There were no other significant events after balance
date .
NOTES TO THE CONDENSED FINANCIAL STATEMENTS CONTINUED
(UNAUDITED)
For the six months ended 31 December 2018

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COMPANY DIRECTORY
Directors
John McMahon - Chairman
Julian Beavis
Elmar Toime
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
9-11 Corinthian Drive
Albany
AUCKLAND 0632
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
(non-trading)
18 Canaveral Drive
Albany
AUCKLAND
PO Box 301248
Albany
AUCKLAND 0752

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26
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Stock Exchange
The Company’s shares trade on
the New Zealand Stock Exchange
Alternative Market (NZAX) .
NZAX Trading Code: SDL

SOLUTION DYNAMICS
ON THE WEB
www.solutiondynamics.com
www.dejar.com
www.bremy.com

---

Reporting Period6 months to 31 December 2018
Previous reporting period6 months to 31 December 2017
Amount NZ$ 000'sPercentage change
$12,726Up by 12.7%
$192Down by 76.9%
$206Down by 75.1%
Amount per securityImputed amount
Final$0.02000$0.02778
17 April 2019
29 April 2019
1H FY20191H FY2018
$0.39637$0.36646
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
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 6 months ended 30 December 2018.
Interim / Final Dividend
Record Date

---

APPENDIX 4 – NZAX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZAX Listing Rule 7.11.2. For rights, NZAX Listing Rules 7.9.8 and 7.9.9. details on additional pages)
For change to allotment, NZAX Listing Rule 7.10.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCallDividend
If ticked, stateFull
non-renouncable
change
✓
whether:
Interim
✓
YearSpecialDRP Applies
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
ORexplanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per securityPayment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
SupplementaryAmount per security
Currencydividendin dollars and cents
details -
NZAX Listing Rule 7.11.4
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FDP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 5 in the NZAX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
17 April 201929 April 2019
$$0.001389$0.007778
$
NZ$
$291,196
Date Payable
Enter N/A if not
applicable
NZSDLE0001S8
In dollars and cents
RETAINED EARNINGS
$0.020
ORDINARY SHARES
+ 64 9 970 7781+64 9 970 780028022019
EMAIL: announce@nzx.com
Notice of event affecting securities
1
SOLUTION DYNAMICS LIMITED
CHRIS VEALEDIRECTORS RESOLUTION

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MANAGEMENT DISCUSSION & ANALYSIS

Result Introduction
The Company was expecting FY2019 to be a difficult year for three main reasons:
1. NZ Post postage price changes pushing customers into faster switching to digital
communications, eroding gross margins in traditional print/mail side of the business;
2. Higher costs, particularly to support Software and international growth, coupled with the
conclusion of NZTE cost support in the UK during FY2018; and
3. Net losses from acquisitions made in the second half of FY2018.

These factors have proved somewhat stronger than we initially estimated and consequently,
SDL’s result is not only well down on the prior year but also lagging internal budgets. To the
above reasons can be added some unexpected client losses as several customers consolidated
their printing into a single supplier (SDL was only a small portion of those customers’ print
activity).
Much of the earnings pressure emanates from SDL’s domestic NZ operations. Clearly, the
Company has been reactive to this greater local margin pressure and has significantly
restructured NZ print and mail operations to reduce costs. However, cost cutting is a game with
a finite number of moves and the ongoing trend of erosion to physical print and mail volumes
will not abate.
Fortunately, the Company is continuing to see very strong growth with its international software
and arguably has the strongest prospective pipeline in its history. Both DéjarMail and DTP’s
Jupiter platform are generating broad interest. But pipelines don’t pay any bills and there is
significant pressure to execute in closing sales over 2019. The negative domestic forces are
proving stronger than the positive international software forces in FY2019, however, irrespective
of whether SDL is successful with some of the larger sales opportunities currently in play, the
level of software wins achieved to date, coupled with ongoing growth from existing software
customers, means – subject to the risk of an unexpected major customer loss – the Directors are
reasonably confident of a return to earnings growth in FY2020.
Result Overview
Solution Dynamics Limited (“SDL” or “Company”) produced an unaudited net profit after tax of
$0.192 million for the half year (1H FY18 $0.832 million), a decline of 77%. This fall in profit
stems from a variety of factors including the impact of losses from acquisitions, increased
amortisation resulting from acquisitions, postage price increases causing a tougher domestic
print and mailing market, and much higher UK costs. The effect of these factors is detailed more
fully in the Financial Performance section, which highlights that even on a like-for-like basis,
adjusting for the effect of acquisitions, earnings declined. Cash flow from operations was $0.170
million (1H FY18 $0.827 million) and the closing net cash position at 31 December was $1.39

million (1H FY18 $2.41 million). The Directors have declared an interim dividend of 2.0 cents per
share (1H FY18 4.0 cents), fully imputed.
SDL typically has a seasonal earnings pattern that is stronger in the first half of the financial year.
This is not expected to be the case in FY2019, given the timing of additional costs, acquisition
losses from DTP skewed towards the first half, and new business revenue and pipeline strongly
biased towards the second half.
Operational Commentary
Operating revenue grew 12.7% to $12.73 million. As usual, there were revenue gains in low
margin postage revenue and subcontracted printing in the UK where SDL earns low margins. NZ
domestic print and mail volumes are under increasing pressure, with digital print and document
handling revenue declining 10.9% year-on-year. The consequence of SDL’s changing revenue
mix – particularly the pressure on higher margin local print and mail volumes, more on that
below – was a drop in the Company’s gross margin percentage from 37.3% to 32.87% (although
dollar gross margin largely held, down 0.8% to $4.18 million). Costs in general continue to be
well managed, although Selling, General & Administration costs rose 24.5% with the increase
coming from both the effect of acquisitions as well as SDL adding additional resource for
Software development and support, particularly in the UK.
Software & Technology revenues continue to show gains, increasing by 28.5% to $3.78 million
(1H FY18 $2.93 million), as the Company’s UK revenues in particular continue to build. SDL’s UK
channel partners are increasingly gaining sales traction. The acquisition of DTP has opened a
broad range of material sales opportunities in the US, with one medium sized new client added
late in 2018.
As noted above, the traditional digital print and document handling services market revenue
declined 10.9% year-on-year to $3.01 million (1H FY17 $3.38 million). Anecdotally, the pace of
overall decline in market volumes has accelerated and SDL is not immune to this trend. The
Company has historically gained market share at a faster pace than customers have been
switching to electronic communications channels, however, the loss of several clients to
integrated print providers saw this position reverse during the half (and the impact will be felt to
a greater degree in the second half and fully in FY2019). The first half saw an ongoing increase in
the rate at which customers switched to electronic communications, with mail lodgements down
14.4% and email volumes up 37.5%. While the gross margin percentage for handling emails is
higher than print, the gross margin dollar value per email that SDL earns is lower and
consequently this increase in switching is acting as a net drag on the Company’s earnings.
As a result of this volume and margin pressure, the Company undertook a cost reduction
restructuring exercise that started in late 2018 and has progressed through early 2019. This has
regrettably affected a number of staff and placed some pressure on the organisation generally
but is forced on SDL by external industry trends. The Directors particularly thank staff for their
assistance and efforts during what is inevitably a difficult process. While we have reduced costs
in the traditional part of the business, the growth in Software and Technology revenues and the
requirement to support a broader range of customers and software solutions has meant
additional staff have been added to support this growth.

The Company is seeing increasing interest in its software technology in the UK and Europe,
particularly DéjarMail, and more recently DTP. Mail resellers are attracted to DéjarMail as a
means of capturing desktop mail volumes, a fragmented sector of the mail market they have
historically been unable to access. SDL now has two large mail resellers in the UK and is seeing
solidly growing volumes through these channels. Additional sales pipeline interest is being
generated by distributed print solutions (the technology SDL acquired through DTP) and also for
scanning solutions (the technology acquired through Scantech) as a result of tighter European
privacy regulations.
Financial Performance
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 56% to $0.58
million (1H HY18: $1.32 million) on sales revenue that rose 12.7%.

The EBITDA decline stems from two factors. The first is a broadly flat Gross Margin dollar result.
This is partly a sales mix issue; the table below highlights that around two-thirds of revenue
growth came in the very low margin Outsourced Services revenue line, which includes postage.
Postage in New Zealand has always been low margin, however, aggressive price hikes by NZ Post
from 1 July 2019 along with changes to qualifying rules for postage rebates to mail houses
further eroded margins. Arguably the greater impact to SDL from NZ Post’s price increases was
to exacerbate the rate at which the Company’s customers switched from physical print towards
electronic communications. This mix change from physical to electronic in volumes, combined
with the inherent operating leverage in SDL’s print and physical mail operations caused margin
pressure. The Company has responded with a cost reduction programme, however, the usual
lags in implementation mean that the lower cost structure will only show benefit from early in
the second half of the financial year.
Summary Financial Performance
Yr-on-Yr
Yr-on-Yr
(all figures $000)
1H FY19
1H FY18
$ Change
% Change
Total Revenue
12,726
11,292
1,434
12.7%
Cost of Goods Sold
8,547
7,080
1,467
20.7%
Gross Margin
4,179
4,212
-33
-0.8%
Gross Margin (%)
32.8%
37.3%
Selling, General & Admin Costs
3,597
2,888
709
24.5%
EBITDA
582
1,324
-742
-56.0%
EBITDA Margin (%)
4.6%
11.7%
Depreciation
109
102
7
6.9%
Amortisation
173
53
120
226.4%
EBIT
300
1,169
-869
-74.3%
Net Interest
-3
-2
-1
n.a.
Net Profit before Tax
303
1,171
-868
-74.1%
Taxation
111
339
-228
-67.3%
Net Profit after Tax
192
832
-640
-76.9%

The second cause of lower EBITDA is higher SG&A costs. This has been caused by three main
factors: no further NZ Trade and Enterprise (“NZTE”) reimbursement of part of the Company’s
UK market development costs (the NZTE support programme expired at the end of FY2018);
additional sales and support personnel in the UK and Europe to support Software growth; and
the addition of overheads in relation to acquisitions made during the second half of FY2018.
The acquisition of DTP has also had a negative financial effect although the Company expects this
position will progressively abate during the second half of FY2019. However, until SDL can
obtain traction with its US sales pipeline opportunities, North America is likely to remain a drag
on EBITDA.
SDL’s taxation rate in 1H FY2018 was 36.6% versus 28.9% in the prior period. The Company is
paying tax at the full rate on both New Zealand and UK earnings but incurring losses in the US.
These US losses are not able to be grouped for tax purposes so skew the reported tax rate above
the NZ and UK statutory rates. This position will persist until the US becomes profitable.

The 28.5% growth rate for Software & Technology revenue streams in the first half was a
pleasing acceleration in the rate of growth (growth for 1H FY18 was 21.0%). SDL’s pipeline of
opportunities and sales efforts in the UK, European and US markets are likely to ensure Software
& Technology has a number of years of revenue growth ahead. The Company is still overly
reliant on direct sales efforts by a couple of key staff and a small number of customers in the UK.
SDL’s small scale and geographic distance from our most important growth markets continues to
place pressure on management resources. At some point SDL will require a step change in costs
for both greater management and materially larger in-market sales presence in the UK and
North America.
Digital print in 1H FY2019 was extremely problematic, largely as a result of NZ Post price
increases and the resulting increased rate of switching to electronic communications noted
above. The industry has excess digital print capacity and rationalisation will inevitably occur; the
Company has held discussions with several market participants, however, to date we have found
a general reluctance to be the first mover in structural industry change.
Acquisitions Performance
The acquisitions of Scantech and DTP in late FY2018 were an aggregate net drag on profitability
in the first half of FY2019, with a small Scantech gain being well offset by the DTP deficit. As the
following table shows, they collectively incurred operating losses of $0.174 million (pre-
amortisation) and a further $0.115 million in amortisation charge, for a total drag of $0.289
million to earnings.
Revenue AnalysisYr-on-YrYr-on-Yr
(all figures $000)1H FY191H FY18$ Change% Change
Software & Technology3,7702,93383728.5%
Digital Print & Document Handling3,0123,381-369-10.9%
Outsourced Services5,9444,97896619.4%
Total Revenue12,72611,2921,43412.7%

Given the earnings losses to date, from DTP in particular, it is reasonable for investors to
understand why the Company undertook the acquisition. Firstly, DTP was incurring losses when
it was acquired by SDL and the extent of those losses was a factor in the amount SDL paid to
acquire the business and the structure of the earn-out. SDL’s directors and management were
aware of the likely risk that the losses would continue for some time.
Secondly, the key asset SDL acquired was DTP’s Jupiter platform. This is a software platform that
links into a global network of printers and allows globally distributed print instead of home
country printing and international mailing. This lowers the combined print and mail cost as well
as shortening the time for communications to reach end customers; Jupiter appeared a
complementary add on product to broaden SDL’s existing suite of communication-enabling
software. Thirdly, from discussions with various international users of SDL’s existing software,
there seemed to be genuine demand for a Jupiter-like service and there were not any obvious
competing offerings. It seemed probable that the small size of DTP (a three person company)
meant that even with a good product, DTP simply did not have broad sales or distribution
channels to market. Lastly, it seemed probable that owning Jupiter would open incremental
doors to a range of customers that SDL would not otherwise access.
Our view from the time of acquisition is broadly unchanged. While losses have been somewhat
greater than we initially expected, the new opportunities that DTP is generating are, to date,
proving far greater than we anticipated. The December 2018 announcement of a new contract
with a US-based multinational provider of marketing communication services to SMEs was a
direct result of having Jupiter as the integral part of an overall communications solution. The
magnitude of DTP-related sales pipeline is exceptionally material in scale to SDL’s prospects; the
task ahead is to convert this pipeline into contracts.
Balance Sheet, Liquidity and Debt
SDL closed the half year with net cash on hand of $1.39 million, down 43% on 1H FY2018 ($2.41
million). A bank overdraft facility of $0.2 million remains in placed but is unused. Capital

expenditure was $0.23 million in the half, largely for upgrades to the Company’s mailing
equipment and financial reporting systems.

Book value (net assets) declined by 6.4% to $3.71 million, the result of lower earnings in the first
half coupled with the accounting reduction to retained earnings from payment of the final
FY2018 dividend. Working capital remains reasonably well managed although the negative
movement in working capital was slightly higher than expected.
Given a focus on ensuring value is obtained from the two acquisitions made in the second half of
FY2018, the Company is not currently examining any acquisition opportunities. SDL remains
interested in opportunities that will inevitably result from domestic mail and print industry
restructuring, however, there are only a small number of transactions that would make sense for
the Company, and any deal would need to be value adding for shareholders.
Dividend
SDL is declaring an interim dividend of 2.0 cents per share, a 50% reduction on the prior year.


The dividend is fully imputed and the amount represents a payout ratio of 79.8% of earnings per
share. A new market development agreement with NZTE (details in FY2019 Outlook section
below) will limit SDL to paying future dividends to a limit of 75% of NPATA (Net profit after tax
but before amortisation) across any financial year.
Selected Balance Sheet and Cashflow FiguresYr-on-YrYr-on-Yr
(all figures $000)1H FY191H FY18$ Change% Change
Net Cash on Hand (net of debt)1,3852,408-1,023-42.5%
Non-current Assets2,8111,95985243.5%
Net Other Liabilities-482-398-8421.1%
Net Assets3,7143,969-255-6.4%
Cashflow from Trading503968-465-48.0%
Movement in Working Capital-333-141-192136.2%
Cash Inflow from Operations170827-657-79.4%
Earnings and Dividend per ShareYr-on-YrYr-on-Yr
1H FY191H FY18Change% Change
Shares on Issue (000)14,559.814,249.8310.02.2%
Earnings per share (cents)2.516.21-3.70-59.6%
Dividend per share (cents)2.004.00-2.00-50.0%
Dividend proportion Imputed100.0%100.0%n.a.n.a.
Payout ratio79.8%64.4%n.a.n.a.

Migration to NZX Main Board Listing
The process of moving from the NZAX to the main board is well underway and the Directors have
now approved the draft governance and policy documents and draft constitution. A further
announcement on this process is expected shortly. The Directors remain conscious of the
limited liquidity in trading of SDL shares and will review trading liquidity following the transfer to
the NZX Main Board.
FY 2019 Outlook
Two trends will influence the second half outlook and the relative timing and strength of these
may cause actual results to vary from expectations to a greater degree than usual. The first is
the loss of several domestic contracts that progressively occurs during 2H, partly offset by an
internal restructuring to lower costs associated with print and mail operations. The second –
more variable effect – is the growth of international Software and Technology revenue, where a
number of new or trial contracts and development projects commence during 2H.
In February 2019, SDL was approved by NZTE for a further contract for market development
costs to support for the Company’s US expansion efforts. This will be a three year agreement
that is similar in nature to SDL’s prior NZTE agreement for UK market development. To ensure
the Company retains adequate internal funding for US growth, the new NZTE agreement will also
cap SDL’s dividend payout ratio at 75%, although in recognition of the fact that acquisitions have
added significantly to non-cash amortisation charges against profit, the payout ratio cap is now
applied to net profit after tax but before amortisation (NPATA).
The acquisition of DTP has broadened SDL’s pipeline of opportunities significantly, as noted
above, both geographically into the US and in terms of the number of potential clients seeking a
distributed print solution. The Directors note that, irrespective of how the 2H earnings volatility
eventuates, should SDL succeed in closing some of the current larger prospects, particularly
those related to DTP/Jupiter, then FY2020 earnings growth may be very material.
SDL has previously provided FY2019 guidance for earnings decline of around 15%. Following the
first half result, and considering cost and gross margin pressures, plus the Software pipeline, are
revising the full year outlook down to an expected reported earnings decline of around 25% to
35%. The caveat to the full year forecast is that timing and success around the Software and
Technology opportunities during 2H introduces a higher-than-usual degree of volatility (both
upside and downside) to this outlook.

John McMahon Nelson Siva
Chairman Director & Chief Executive Officer
+61-410-411 806 +64-21-415027