SDL 1H FY2020 Financial Results and Interim Dividend

Template
Distribution Notice

Updated as at 18 December 2019



Please note: all cash amounts in this form should be provided to 8 decimal places

Section 1: Issuer information
Name of issuer Solution Dynamics Limited
Financial product name/description Ordinary shares
NZX ticker code SDL
ISIN (If unknown, check on NZX
website)
NZSDLE0001S8
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year
X
Special
DRP applies
Record date 27 March 2020
Ex-Date (one business day before the
Record Date)
26 March 2020
Payment date (and allotment date for
DRP)
3 April 2020
Total monies associated with the
distribution
1

$439,194 (14,639,810 shares @ $0.03000000 / share)
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.04166667
Gross taxable amount
3
$0.04166667
Total cash distribution
4
$0.03000000
Excluded amount (applicable to listed
PIEs)
N/A
Supplementary distribution amount N/A
Section 3: Imputation credits and Resident Withholding Tax
5

Is the distribution imputed Fully imputed



1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is
fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute
advice as to whether or not RWT needs to be withheld.

If fully or partially imputed, please
state imputation rate as % applied
6

28%
Imputation tax credits per financial
product
$0.01666667
Resident Withholding Tax per
financial product
$0.00208350
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
N/A
Start date and end date for
determining market price for DRP
N/A N/A
Date strike price to be announced (if
not available at this time)
N/A
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
N/A
DRP strike price per financial product
N/A
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
N/A
Section 5: Authority for this announcement
Name of person

authorised to make
this announcement
Chris Veale, Chief Financial Officer
Contact person for this
announcement
Chris Veale, Chief Financial Officer
Contact phone number +64 21 855142
Contact email address chrisve@solutiondynamics.com
Date of release through MAP

27 February 2020





6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.

---

Simplifying Business
Interim Report 2020

Interim
Report
2020
Highlights for Six Months
to 31 December 2019
> Net profit after tax increased 245%
to $0.47 million
> Software & technology revenues
grew 92% to $9.37 million, with
strong pipeline of opportunities
> EBITDA increased 34% to $1.42
million
> Cash flow from operations increased
$1.33 million to $1.98 million and
net cash at 31 December 2019 was
$2.20 million
> Interim dividend of 3.0 cents per
share (up 1.0 cents)
> Upgraded FY2020 guidance:
revenue growth in excess of 40%
and NPAT in excess of $2.00 million
| 2 |

Highlights for Six Months to 31 December 2019 .............................. 2
Chairman’s & Chief Executive Officer’s Report ................................ 4
Consolidated Financial Statements for the
Six Month Period Ended 31 December 2019
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 Statement of Cash Flows (Unaudited) ...........................17
Notes to the Condensed Financial Statements (Unaudited) .....................19
Company Directory .......................................................27
Contents
| 3 |

Chairman’s & Chief Executive
Officer’s Report
Result Overview
Solution Dynamics Limited (“SDL” or “Company”) produced an unaudited net profit after tax
of $0.47 million for the half year (1H FY2019 $0.14 million), a pleasing improvement of 245%.
A new accounting standard for leases applies for FY2020 (see next section) and the prior year
profit has been restated for this (previously reported profit for 1H FY2019 was $0.19 million).
This improved result stems from a variety of factors. Positive contributors were:
• significant new revenue from successful initial trials and implementation of a global
distributed hybrid mail and logistics solution (based on SDL’s Jupiter platform) for a US
multinational organisation; and,
• somewhat better than expected domestic NZ print and mail services, albeit with revenue
and gross margin still below the prior year;
While a couple of factors acted as constraints:
• Software margins were below expectations as ongoing growth in SaaS revenues was more
than offset by reduced services and implementation revenues; and
• the planned material increase in Selling, General & Administration (SG&A) costs to further
support UK operations and more particularly, development of the US market opportunity.
Cash flow from operations was $1.98 million (1H FY19 $0.64 million) and the closing net
cash position at 31 December was $2.20 million (1H FY19 $1.39 million). The Directors have
declared an interim dividend of 3.0 cents per share (1H FY19 2.0 cents), fully imputed.
Prior Year Result Comparability and Change of Accounting Standard for
Leases
SDL’s 1H financial statements for FY2020 do not show the same results for 1H FY2019 as the
interim report in the prior year. This is the result of an FY2020 accounting standards change
(from NZ IAS 17 to NZ IFRS 16 for technically interested readers) that changes how leases are
treated in the Profit or Loss Statement and on the Balance Sheet. SDL has adopted the fully
retrospective approach which means the financial statements from the prior period are adjusted
to conform with NZ IFRS 16; this enables a like-for-like comparison between the two years.
See Note 2 to the Financial Statements on page 20 for further details about the retrospective
changes to prior period figures.
| 4 |

SDL has two main leases: for the Company’s premises, and for various items of printing
equipment. The previous accounting standard (NZ IAS 17) saw this annual lease cost for these
– approximately $0.9 million – included in the “Expenses” line in the Consolidated Statement of
Profit or Loss and the leases had no financial effect or appearance on the Balance Sheet.
The NZ IFRS 16 standard now requires leases to be capitalised onto the Balance Sheet based
on the present value of future lease cash payments. In the case of SDL’s premises for example,
that means the Balance Sheet will now show a “Right to Use” asset, along with a liability for
the present value of the cash payments owed under the lease. That capitalised “Right to Use”
amount is then expensed through the Profit or Loss Statement as Depreciation with the balance
of the lease rental cost appearing as an Interest Expense. The cash flow statement is similarly
changed with cash flow from operating activities increasing and being offset by an increase in
the cash outflow from financing activities.
It is important to note that the Net Profit after Tax is little changed for 1H FY2020 under the
new accounting standard (FY2019 full year NPAT reduced by $0.11 million to $0.56 million),
but how the lease expenses are categorised in the Profit or Loss Statement is significantly
different. In SDL’s case for FY2020, the Company expects that direct Expenses will be around
$0.9 million lower so EBITDA will show as approximately $0.9 million higher than it would
otherwise have been under the old accounting treatment. Offsetting that, Depreciation and
Interest expenses are similarly around $0.9 million higher in aggregate. These two effects largely
offset one another at the Net Profit line (there may be small timing differences between the two
accounting standards but these are not expected to be material).
Operational Commentary
Operating revenue grew 24.0% to $15.79 million. All of this growth came from North American
operations, including a new contract with a US multinational organisation. While domestic NZ
operations performed slightly better than expected, revenues nevertheless declined with mail
lodgements and print volumes down around 14%. Recent restructuring and personnel changes
have improved the domestic outlook and modest new business wins have been achieved.
However, the overall market continues its structural decline and industry rationalisation seems
inevitable at some point. The Company’s overall gross margin percentage improved slightly, up
140 basis points to 35.6% on an improved sales mix, and gross margin dollars rose 29.2% to
$5.62 million.
| 5 |

SDL has historically operated predominantly in New Zealand with some international software
revenue. That position is changing. This half year result saw international software revenues
as a proportion of total revenue move from around 26% in 1H FY2019 to around 49% in
1H FY2020. Moving into FY2021, and assuming the software contracts underway deliver as
expected, then international software revenue will increasingly dominate the sales mix. Note
that this international software revenue includes two different business models: in one, SDL is a
pure software SaaS provider and earns revenue solely from the customer utilising the software.
In the other, SDL still provides the software on a SaaS basis but also earns revenue directly
related to the software platform by acting as the customer’s provider of a total communications
solution including combinations of print, logistics and postage.
As noted earlier, SG&A costs are well up, rising 27.5% year-on-year (on top of a similar increase
the prior year). The sizeable increases in both years are from a combination of investing in US
operations, building out additional support for a major contract and further hiring for expansion
in the US (and also in the UK). The pipeline of qualified opportunities internationally is very
material and some initial contract wins have already been achieved. Further success in the US
market would see a step change in scale for SDL and the Board is committed to ensuring that
adequate resourcing (both for sales and support) is applied to prosecute the opportunities to
the best of the Company’s abilities.
Software & Technology revenues were very strong overall in the first half, up 92.4%, driven
largely by a new contract with a US-based multinational. Excluding this contract, Software’s
performance did not reach expectations. While SaaS revenues continue to show gains, the
Company’s activity levels around software-related services for several clients were notably
subdued. We expect some degree of recovery in services activity during the second half of the
financial year. Revenue growth was also aided by a stronger contribution from DigitalToPrint
(DTP).
As noted above, traditional Digital Print & Document Handling services market revenues
declined 20.2% year-on-year to $2.71 million (1H FY19 $3.40 million, restated, see Note 4 in
the Financial Statements). The first half saw an ongoing increase in the rate at which customers
switched to electronic communications, with mail lodgements down 13.8% and email volumes
up 11.3%. 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 switching continues
to act as a drag on the Company’s earnings.
The Company advises that it has signed a mutual Disaster Recovery Agreement with a third-
party provider for digital print and mail processing. SDL has also established a second site for
| 6 |

IT and data processing. The agreement with the third-party provider completes the disaster
recovery process for our mutual clients.
The Company pipeline for Software is exceptionally strong in the US and some recent new
business wins have been achieved. This was despite the focus on successfully implementing
the onboarding of a large contract, which consumed significant management and support time
and constrained UK and US sales efforts. A couple of sizeable recent opportunities have been
successful, with commercial terms agreed, although final contracts have yet to be concluded.
Financial Performance
Earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 34.2% to
$1.42 million (1H FY19: $1.06 million) on sales revenue that rose 24.0%. As noted above,
reported EBITDA is affected by the change to lease accounting, although all the figures in
the following table are like-for-like, with 1H FY19 restated to be consistent with the changed
accounting standard.
Summary Financial Performance Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY20 1H FY19 $ Change % Change
Total Revenue 15,785 12,726 3,059 24.0%
Cost of Goods Sold 10,168 8,377 1,791 21.4%
Gross Margin 5,617 4,349 1,268 29.2%
Gross Margin (%) 35.6% 34.2%
Selling, General & Admin Costs 4,201 3,294 907 27.5%
EBITDA 1,416 1,055 361 34.2%
EBITDA Margin (%) 9.0% 8.3%
Depreciation 581 550 31 5.6%
Amortisation 176 173 3 1.7%
EBIT 659 332 327 98.5%
Net Interest 64 85 (21) n.a.
Net Profit before Tax 595 247 348 140.9%
Taxation 126 111 15 13.5%
Net Profit after Tax 469 136 333 244.9%
| 7 |

The EBITDA increase stems from two factors. First is the positive effect on Gross Margin dollars
from increased revenue and a more favourable sales mix. Second is the negative offset from
the sizeable increase in SG&A costs needed to support higher international activity levels and
significant sales opportunities in the US in particular.
After the Company acquired DTP in 2018, it applied to NZ Trade & Enterprise (NZTE) for market
support to expand its new US activities. NZTE is supporting part of the additional US costs on a
proportionate basis for up to three years or a maximum of $0.6 million.
Revenue Analysis Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY20 1H FY19 $ Change % Change
Software & Technology 9,365 4,867 4,498 92.4%
Digital Imaging & Document Handling 2,713 3,401 -688 -20.2%
Outsourced Services 3,707 4,458 -751 -16.8%
Total Revenue 15,785 12,726 3,059 24.0%
The 92.4% growth rate for Software & Technology revenue in the first half was the highlight of
the result and mainly the result of new business activity offset by some slowdown in software-
related services in the UK (expected to begin recovering during the second half). SDL’s pipeline
of opportunities across UK and Europe, but notably in North America, should ensure Software
& Technology has several years of revenue growth ahead. SDL’s hybrid print-on-demand service
and Jupiter’s distributed global print software platform are providing the Company with a strong
competitive advantage and both products currently face minimal competition. We noted a year
ago that SDL’s small scale and geographic distance from our most important growth markets
continued to place pressure on management resources and at some point SDL would require a
step change in costs for both management and in-market sales in the UK and North America.
This additional management and sales/support has now largely been added and is producing
positive results.
Domestically, Digital Imaging in 1H FY2020 continued to be difficult, flowing on from
NZ Post price increases in mid-2018 still exacerbating the rate of switching to electronic
communications. The larger effect on the growth rate in 1H FY2020 was the year-on-year
impact of the loss on three medium sized accounts during FY2019. These were all situations
where the customer tendered out their entire print business and the majority of the print was
offset (SDL only does digital print and was unable to compete for the full tender in each case).
| 8 |

Balance Sheet, Liquidity and Debt
SDL closed the half year with net cash on hand of $2.20 million, up 59% on 1H FY2019 ($1.39
million) and largely reversing the drop in 1H FY2019. A bank overdraft facility of $0.2 million
remains in place but is unused. Capital expenditure was a modest $0.17 million in the half,
largely for new inserting equipment in NZ.
Selected Balance Sheet and Cashflow Figures Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY20 1H FY19 $ Change % Change
Net Cash on Hand (net of debt) 2,203 1,385 818 59.1%
Non-current Assets (excl Right of Use) 2,554 2,821 -267 -9.5%
Right of Use Assets 2,361 3,243 -882 -27.2%
Net Other Liabilities (excl Right of Use) -611 -492 -119 24.2%
Right of Use Liabilities -2,489 -3,299 810 -24.6%
Net Assets 4,018 3,658 360 9.8%
Cashflow from Operations
Cashflow from Trading 1,288 975 313 32.1%
Movement in Working Capital 689 -333 1,022 -306.9%
Cash Inflow from Operations 1,977 642 1,335 207.9%
Book value (net assets) increased 9.8% to $4.02 million, largely on improved earnings in the
first half. SDL’s historic equity has been adjusted for the change to the accounting standard
for leases. Working capital remains well managed although some recent contract wins have
introduced a degree of month-to-month and intra-month lumpiness to cash flow. Note from the
preceding table that the NZ IFRS 16 change to lease accounting means the Balance Sheet now
includes both “Right to Use” assets and a corresponding “Right to Use” liability for what SDL
owes on the lease contracts.
| 9 |

Dividend
SDL is declaring an interim dividend of 3.0 cents per share, a 50% increase on the prior year.
Earnings and Dividend per Share Yr-on-Yr Yr-on-Yr
1H FY20 1H FY19 Change % Change
Shares on Issue (000) 14,639.8 14,559.8 80.0 0.5%
Earnings per share (cents) 3.20 0.93 2.27 243.0%
Earnings per share (cents) on NPATA 4.41 2.12 2.28 107.6%
Dividend per share (cents) 3.00 2.00 1.00 50.0%
Dividend proportion imputed 100.0% 100.0% n.a. n.a.
Payout ratio (on NPATA) 68.1% 94.2% n.a. n.a.
The dividend is fully imputed and the amount represents a payout ratio of 93.6% of earnings
per share and 68.1% of earnings per share after adding back Amortisation to Net Profit after
Tax (i.e. NPATA). SDL’s agreement with NZTE in relation to assistance with costs for US market
development spending, limits the Company’s dividend payout to 75% of NPATA earnings.
FY 2020 Outlook
The key factor influencing SDL’s expected result for FY2020 (and likely the key factor moving
into FY2021) is the progressive onboarding and ramp up of new international client wins for the
Company’s software solutions.
A key contract with a US multinational organisation has seen initial trials prove successful
and revenue is steadily increasing with full revenue commencing during the second half of
FY2020. Other recent wins in the US may also begin to contribute during the second half of
FY2020 although some uncertainty remains around how quickly these begin to contribute this
financial year. Assuming these contracts are concluded and all new customers are onboarded
successfully, then substantial further growth is likely in FY2021.
Of particular note, Solution Dynamics Inc. (SDL’s US subsidiary) has been notified it has been
selected as the preferred supplier of a comprehensive communications software workflow
platform for a major US-based customer communications software vendor. SDL’s proposed
solution leverages the Company’s Jupiter CCM cloud platform delivered through a software-
as-a-service model for secure print and digital communications management and delivery. SDL
expects to shortly begin negotiations on a multi-year contract and global rollout schedule.
| 10 |

If successful, implementation will likely commence, at the earliest, in the mid-to-late fourth
quarter of SDL’s FY2020. The Company’s updated guidance assumes no contribution from this
contract in FY2020.
SDL has previously provided FY2020 guidance for revenue growth of around 20% and EBITDA
broadly in line with FY2018 levels (around $2.3 million) with some upside bias risk to the
EBITDA figure. Note that this EBITDA guidance was based on the historic NZ IAS 17 treatment
of leases; the change to NZ IFRS 16 accounting for leases affects the calculation of EBITDA
and no longer makes this a meaningful comparator with the FY2018 figure. Accordingly, SDL
is restating its earnings guidance approach to net profit after tax (NPAT). FY2020 revenue
guidance is raised to in excess of 40% growth over FY2019. Noting that NPAT was $1.3 million
in FY2018, SDL is upgrading its FY2020 NPAT earnings outlook to be in excess of $2.0 million.
This guidance upgrade includes significant revenue and margin in the last two months of
FY2020 and some risk remains around the timing of these over financial year end.
John McMahon Nelson Siva
Chairman Director & Chief Executive Officer
+61-410-411 806 +64-21-415027
| 11 |

(NZ$ in thousands, except per share amounts)
Operating revenue 15,573 12,600 24,879
Grant income 212 119 265
Property rental - 7 11
Total income 15,785 12,726 25,155
Expenses
Employee costs 4,003 3,070 6,240
Research & development 332 370 681
Directors fees & salaries 222 310 477
Print & other outsource expenses 3,425 5,311 10,090
Other expenses 6,387 2,610 5,348
Total Expenses 14,369 11,671 22,836
Earnings before interest, tax,
depreciation & amortisation (EBITDA) 1,416 1,055 2,319
Depreciation 581 550 1,120
Amortisation of intangible assets (software) 176 173 347
Net Interest (income) 64 85 172
Profit before income tax 595 247 680
Income tax 126 111 122
Net profit after income tax 469 136 558
Cents Cents Cents
Basic earnings per share 3.2 0.9 3.8
Diluted earnings per share 3.2 0.9 3.8
6 MONTHS
ENDED
31 DEC
2019
RESTATED
6 MONTHS
ENDED
31 DEC
2018
RESTATED
AUDITED

YEAR ENDED
30 JUN
2019
Consolidated Statement of
Profit or Loss (Unaudited)
For the six months ended 31 December 2019
| 12 |

(NZ$ in thousands, except per share amounts)

Net operating profit after income tax 469 136 558
Exchange differences on translation
of foreign operations 12 14 (7)
Total comprehensive income for the year 481 150 551
6 MONTHS
ENDED
31 DEC
2019
RESTATED
6 MONTHS
ENDED
31 DEC
2018
RESTATED
AUDITED

YEAR ENDED
30 JUN
2019
Consolidated Statement of
Comprehensive Income (Unaudited)
For the six months ended 31 December 2019
| 13 |

(NZ$ in thousands)
Consolidated Statement of
Changes in Equity (Unaudited)
For the six months ended 31 December 2019
SHARE
CAPITAL
EMPLOYEE

SHARE
PLAN
CURRENCY

TRANSLATION
RESERVE
ACCUM-

ULATED
LOSSES
TOTAL
EQUITY
Balance 1 July 2018 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 period after tax - - 136 136
Other comprehensive income - - 14 - 14
Total comprehensive income - - 14 (375) (361)
Balance 31 December 2018 (Restated) 5,357 36 6 (1,741) 3,658
Issue of shares to employees 56 (29) - 29 56
Exercise of employee options - - - - -
Transactions with owners 56 (29) - 29 56
Dividend - - - (293) (293)
Profit for the year after tax - - 422 422
Other comprehensive income - - (21) - (21)
Total comprehensive income - - (21) 129 108
Balance 30 June 2019 (Restated Audited) 5,413 7 (15) (1,583) 3,822
Issue of shares to employees - 8 - 8
Exercise of employee options - - - - -
Transactions with owners - 8 - - 8
Dividend - - - (293) (293)
Profit for the period after tax - - 469 469
Other comprehensive income - - 12 - 12
Total comprehensive income - - 12 176 188
Balance 31 December 2019 5,413 15 (3) (1,407) 4,018
| 14 |

Consolidated Statement of
Financial Position (Unaudited)
As at 31 December 2019
AS AT
31 DEC
2019

RESTATED
AS AT
31 DEC
2018
RESTATED
AUDITED

AS AT
30 JUN
2019
Current Assets
Cash and bank balances 2,203 1,385 1,182
Trade & other receivables 2,894 2,634 3,300
Inventories and work in progress 215 270 359
Prepayments 226 251 128
Total Current Assets 5,538 4,540 4,969
Current Liabilities
Trade creditors 1,961 1,885 1,706
Other current liabilities 760 826 635
Other non-financial liabilities 694 398 898
Employee benefit liabilities 520 528 484
Lease liability right of use assets – current (note 2) 703 811 851
Deferred tax liability 11 10 8
Total Current Liabilities 4,649 4,458 4,582
Working Capital 889 82 387
Non-Current Assets
Capital works in progress 174 116 146
Property, plant & equipment and right of use assets 2,994 3,891 3,431
Intangible assets 686 1,020 860
Goodwill 1,061 1,037 1,061
Total Non-Current Assets 4,915 6,064 5,498
Non-Current Liabilities
Lease liability right of use assets (note 2) 1,786 2,488 2,063
Total Non-Current Liabilities 1,786 2,488 2,063
Net Assets 4,018 3,658 3,822
continued...
(NZ$ in thousands)
| 15 |

Consolidated Statement of
Financial Position (Unaudited)
CONTINUED
As at 31 December 2019
AS AT
31 DEC
2019
RESTATED
AS AT
31 DEC
2018
RESTATED
AUDITED

AS AT
30 JUN
2019
Equity
Share capital 5,413 5,357 5,413
Employee share option plan 15 36 7
Foreign currency translation reserve (3) 6 (15)
Accumulated losses (1,407) (1,741) (1,583)
Total Equity 4,018 3,658 3,822
For and on behalf of the Board
John McMahon Nelson Siva
Director (Chairman) Director
Date: 27 February 2020
| 16 |

Consolidated Statement of
Cash Flows (Unaudited)
For the six months ended 31 December 2019
6 MONTHS
TO 31 DEC
2019
RESTATED
6 MONTHS
TO 31 DEC
2018
RESTATED
AUDITED

YEAR TO
30 JUN
2019
Cash Flow from Operating Activities
Cash was provided from:
Receipts from sales 17,313 14,744 28,280
Other revenue 212 119 265
17,525 14,863 28,545
Cash was applied to:
Payments to suppliers 10,870 9,488 18,239
Payments to employees 4,060 4,036 7,759
GST paid to Inland Revenue 618 697 1,245
15,548 14,221 27,243
Net Cash Inflow from Operating Activities 1,977 642 1,302
Cash Flow from Investing Activities
Cash was applied to:
Purchase of property, plant & equipment 172 218 358
& capital works in progress
Purchase of software 2 14 28
174 232 386
Net Cash (Outflow) from Investing Activities (174) (232) (386)
Cash Flow from Financing Activities
Cash was provided from:
Exercise of employee share options - - 56
- - 56
continued...
(NZ$ in thousands)
| 17 |

Consolidated Statement of
Cash Flows (Unaudited)
CONTINUED
For the six months ended 31 December 2019
6 MONTHS
TO 31 DEC
2019
RESTATED
6 MONTHS
TO 31 DEC
2018
RESTATED
AUDITED

YEAR TO
30 JUN
2019
Cash was applied to:
Payment of dividends 293 511 804
Interest paid 64 85 172
Repayments for term loan & finance lease
liabilities secured on equipment 425 385 770
782 981 1,746
Net Cash (Outflow) from Financing Activities (782) (981) (1,690))
Net change in cash and cash equivalents 1,021 (571) (774)
Add cash & cash equivalents held at beginning of year 1,182 1,956 1,956
Finance Facility and Cash Balance at End of Year 2,203 1,385 1,182
Reconciliation of net deficit after income tax for
he year with net cash inflow/ (outflow) from
perating activities
Net (deficit)/surplus after income tax 469 136 558
Interest expense (reclassified as financing activity) 64 85 172
Interest income (reclassified as financing activity) - - -
Add non-cash items:
Depreciation & amortisation of assets 757 723 1,467
(Gain) / Loss on foreign exchange (18) (1) (21)
Credit losses (7) - 22
Other non-cash items 23 32 (16)
Cash Flow from Trading 1,288 975 2,182
Add movements in Working Capital 689 (333) (880)
Net Cash Inflow from Operating Activities 1,977 642 1,302
| 18 |

Notes to the Condensed Financial Statements
(Unaudited)
For the six months ended 31 December 2019
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 2019 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 2019.
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 NZX. 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 customer communication 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 2019 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 2019
have also been included.
The unaudited interim financial statements for the Group for the six months ended 31 December
2019 were authorised for issue on 27 February 2020 in accordance with a resolution of the
directors of the Company.
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 2019.
Certain comparative information has been reclassified to conform with the current period’s
classification.
| 19 |

Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2019
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
New Zealand Equivalent to International Financial Reporting Standard 16: Leases
NZ IFRS 16: Leases replaces NZ IAS 17: Leases. It introduces a single lessee accounting model
and requires a lessee to recognise assets and liabilities for all leases with a term of more than
12-months, unless the underlying asset is of low value. A lessee is required to recognise a right
of use asset, representing its right to use the underlying asset, and a lease liability, representing
its obligation to make lease payments.
Under the new standard SDL recognises certain building and equipment leases as right of use
assets and lease liabilities. At lease inception the lease liability is measured at the present value
of the remaining lease payments, discounted at the lessee’s incremental borrowing rate (defined
as the rate of interest that a lessee would have to pay to borrow over a similar term, and with
similar security, the funds necessary to obtain the asset of a similar value in a similar economic
environment. SDL has determined a rate of 4.5% for property leases and 8.5% for equipment
leases.). The unwind of the discount applied on recognition of a lease liability is recognised as
interest expense in the Consolidated Statement of Profit or Loss using the effective interest
method.
Right of use assets are measured at inception at an amount equal to the lease liability. The right
of use asset is subsequently depreciated using the straight-line method over the lease term,
including any rights of renewal where the Company believes that an extension of the lease is
likely. The useful lives of the right of use assets recognised under NZ IFRS 16 ranges from three
to six years.
SDL has included the right of use assets along with other property and equipment term assets in
the Consolidated Statement of Financial Position. The value of these at December 2019 may be
seen in the table below.
The Group adopted NZ IFRS using the retrospective approach, resulting in a restatement of
comparative figures.
The effect of adopting NZ IFRS on the Consolidated Statement of Profit or Loss for the six
months ended 31 December 2018 is as follows:
| 20 |

Statement of Profit or Loss - increase (decrease)
6 months Year
ended ended
31 Dec 30 June
(NZ$ in thousands) 2018 2019
Rental & operating lease expenses 406 668
Other expenses 67 278
Earnings before interest, tax, depreciation & amortisation (EBITDA) 473 946
Depreciation (441) (882)
Net interest (88) (176)
Net profit after income tax (56) (112)
The effect of adopting NZ IFRS 16 on the Consolidated Statement of Financial Position as at 31
December 2018 is as follows:
Statement of Financial Position - increase (decrease)
As at As at
31 Dec 30 June
(NZ$ in thousands) 2018 2019
Assets
Property, plant & equipment and right of use assets 3,243 2,802
Liabilities
Lease liability right of use assets - Current (811) (851)
Lease liability right of use assets - Term (2,488) (2,063)
Equity (56) (112)
The adoption of NZ IFRS 16 also resulted in a reclassification in the Consolidated Cash Flow
Statement between operating and financing cash flows. The reclassification resulted in a $0.47
million increase in operating cash flows (FY2019 $0.95 million) and a corresponding decrease to
financing cash flows.
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.
| 21 |

Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2019
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 2019. The only exceptions
are 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 and the determination of the applicable interest rate in valuing
right of use assets with the implementation of NZ IFRS 16 - Leases.
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 three streams; Outsource Services, Software & Technology, Digital Imaging & 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.
»Scantech provides high volume scanning and capture of both physical and digital
documents; it was acquired through the purchase of Scantech Ltd.
»Ok2Pay – is a financial transaction engine that processes Accounts Payable
invoices, credit vouchers, and cheques.
Software & Technology services revenues in markets outside New Zealand include print and
related services, logistics and postal revenues derived through the technology platforms.
| 22 |

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 Imaging & Output Services is solely New Zealand revenue and includes the
printing of client’s information digitally using high speed laser printers followed by output
fulfilment, lodgement and distribution of those documents using a variety of machine and
other processes.
• Outsourced Services, not all components of Solution Dynamics’ services in New Zealand
are produced internally. External elements such as domestic New Zealand 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.
6 months to 6 months to Year to
(NZ$ in thousands) December 2019 December 2018
(1)
June 2019
(1)
Software & Technology 9,365 59% 4,867 38% 10,673 42%
Digital Imaging &
Output Services 2,713 17% 3,401 27% 6,309 25%
Outsourced Services 3,707 23% 4,458 35% 8,173 32%
Total income 15,785 100% 12,726 100% 25,155 100%
Less cost of sales 10,168 64% 8,377 66% 16,487 66%
Gross margin 5,617 36% 4,349 34% 8,668 34%
Selling, general
& administration 4,201 27% 3,294 26% 6,349 25%
Earnings before interest, tax,
depreciation & amortisation 1,416 9% 1,055 8% 2,319 9%
(1) Scantech and some UK Fulfilment costs have been restated from outsource services for the periods ending 31 December 2018 and June 2019. This is to bring
the prior periods in line with the revised definition of software and technology services and reflect the acquisition of Scantech Ltd in March 2018.
| 23 |

Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2019
6 months to 6 months to Year to
(NZ$ in thousands) December 2019 December 2018 June 2019
Depreciation 581 4% 550 4% 1,120 4%
Amortisation 176 1% 173 1% 347 1%
Interest 64 0% 85 0% 172 1%
Income tax 126 1% 111 1% 122 1%
Operating Profit
after income tax 469 3% 136 2% 558 2%
Segment Assets
Assets are not segmented between service streams
Information about Major Customers
Included in revenues for Solution Dynamics of $15.785 million (2018: $12.726 million) are
services revenues of $2.969 million (2018: $1.513 million) which arose from sales to the
Company’s largest customer.
Geographical Information
The Group has customers in New Zealand, Australia and Europe.
REVENUE FROM NON-CURRENT
EXTERNAL CUSTOMERS ASSETS
6 mths 6 mths Year to As at As at As at
to 31 Dec to 31 Dec 30 June 31 Dec 31 Dec 30 June
(NZ$ in thousands) 2019 2018 2019 2019 2018 2019
New Zealand 8,066 9,387 16,472 2,802 2,536 2,677
Australia 238 312 519 - - -
United States of America 5,095 401 3,033 - 6 4
Europe 2,386 2,626 5,131 9 12 7
Total 15,785 12,726 25,155 2,811 2,554 2,688
| 24 |

5. CASH & CASH EQUIVALENTS
As at As at As at
31 Dec 31 Dec 30 June
(NZ$ in thousands) 2019 2018 2019
Cash and cash equivalents 2,203 1,385 1,182
Total Finance Facility and Cash 2,203 1,385 1,182
Solution Dynamics has an overdraft facility in place with the ANZ Bank at an interest rate of
7.7% p.a. (2018: 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 2018: $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
(2018: $65,000) to the Group’s suppliers.
6. SHARE CAPITAL & SHARE-BASED PAYMENTS
Solution Dynamics Limited has 14,639,810 ordinary shares (2018 14,559,810 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
Shares in 000’s As at As at As at
31 Dec 31 Dec 30 June
2019 2018 2019
Shares Issued and Fully Paid:
- Beginning of the Period 14,640 14,560 14,560
- Share Issue (exercise of options) - - 80
Shares Issued and Fully Paid 14,640 14,560 14,640
| 25 |

Employee Share Option Plan:
- Beginning of the Period 160 80 80
- Options issued 80 - 160
- Options vested - - (80)
Shares Authorised for Share-based Payments 240 80 160
Total Shares Authorised at the end of the Period 14,880 14,640 14,800
The 240,000 options outstanding (2018: 80,000) were at a weighted average exercise price
of $1.68 (2018: $0.44). 160,000 options are eligible to be exercised from January 2022 with
80,000 options eligible to be exercised from September 2022.
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 2019 to 31 December 2019 were as follows:
• Key management were paid $447,500 (as employees of Solution Dynamics Limited)
during the period (2018: $424,216) and were owed $51,764, including annual leave, at 31
December 2019 (2018: $68,176).
• Salaries paid to directors are disclosed in the Consolidated Statement of Profit or Loss.
8. EVENTS AFTER THE BALANCE DATE
At the board meeting of 27 February 2020, the directors resolved to pay a fully imputed interim
dividend of 3.0 cents per share, amounting to $439,194 (2018: the directors approved the
payment of a fully imputed interim dividend of 2.0 cents per share, amounting to $291,196).
There were no other significant events after balance date.
Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2019
| 26 || 26 |

Directory
Directors
John McMahon – Non-independent
Chairman
Julian Beavis - Independent
Elmar Toime – Independent
Andy Preece – Independent
Lee Eglinton - Independent
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
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
Rosedale
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
| 27 |

Head Office:
18 - 24 Canaveral Drive, Rosedale, Auckland 0632, New Zealand
Phone +64 9 970 7700 | PO Box 301248, Albany 0752, New Zealand
info@solutiondynamics.com | www.solutiondynamics.com
New Zealand  United Kingdom  United States of America

---

Physical Address
18-24 Canaveral Drive, Rosedale
Auckland 0632, New Zealand

Postal Address
PO Box 301248, Albany
Auckland 0752, New Zealand
Contact
Phone: +64 9 970 7700
Email: info@solutiondynamics.com
www.solutiondynamics.com


27 February 2020


SDL 1H FY2020 - CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT
Result Overview
Solution Dynamics Limited (“SDL” or “Company”) produced an unaudited net profit after tax of $0.47 million
for the half year (1H FY2019 $0.14 million), a pleasing improvement of 245%. A new accounting standard for
leases applies for FY2020 (see next section) and the prior year profit has been restated for this (previously
reported profit for 1H FY2019 was $0.19 million).
This improved result stems from a variety of factors. Positive contributors were:
• significant new revenue from successful initial trials and implementation of a global distributed
hybrid mail and logistics solution (based on SDL’s Jupiter platform) for a US multinational
organisation; and,
• somewhat better than expected domestic NZ print and mail services, albeit with revenue and
gross margin still below the prior year;
While a couple of factors acted as constraints:
• Software margins were below expectations as ongoing growth in SaaS revenues was more than
offset by reduced services and implementation revenues; and
• the planned material increase in Selling, General & Administration (SG&A) costs to further
support UK operations and more particularly, development of the US market opportunity.
Cash flow from operations was $1.98 million (1H FY19 $0.64 million) and the closing net cash position at 31
December was $2.20 million (1H FY19 $1.39 million). The Directors have declared an interim dividend of 3.0
cents per share (1H FY19 2.0 cents), fully imputed.
Prior Year Result Comparability and Change of Accounting Standard for Leases
SDL’s 1H financial statements for FY2020 do not show the same results for 1H FY2019 as the interim report
in the prior year. This is the result of an FY2020 accounting standards change (from NZ IAS 17 to NZ IFRS 16
for technically interested readers) that changes how leases are treated in the Profit or Loss Statement and
on the Balance Sheet. SDL has adopted the fully retrospective approach which means the financial
statements from the prior period are adjusted to conform with NZ IFRS 16; this enables a like-for-like
comparison between the two years. See Note 2 to the Financial Statements on page 20 for further details
about the retrospective changes to prior period figures.
SDL has two main leases: for the Company’s premises, and for various items of printing equipment. The
previous accounting standard (NZ IAS 17) saw this annual lease cost for these – approximately $0.9 million –
included in the “Expenses” line in the Consolidated Statement of Profit or Loss and the leases had no
financial effect or appearance on the Balance Sheet.
The NZ IFRS 16 standard now requires leases to be capitalised onto the Balance Sheet based on the present
value of future lease cash payments. In the case of SDL’s premises for example, that means the Balance
Sheet will now show a “Right to Use” asset, along with a liability for the present value of the cash payments
owed under the lease. That capitalised “Right to Use” amount is then expensed through the Profit or Loss
Statement as Depreciation with the balance of the lease rental cost appearing as an Interest Expense. The
cash flow statement is similarly changed with cash flow from operating activities increasing and being offset
by an increase in the cash outflow from financing activities.
It is important to note that the Net Profit after Tax is little changed for 1H FY2020 under the new accounting

Physical Address
18-24 Canaveral Drive, Rosedale
Auckland 0632, New Zealand

Postal Address
PO Box 301248, Albany
Auckland 0752, New Zealand
Contact
Phone: +64 9 970 7700
Email: info@solutiondynamics.com
www.solutiondynamics.com


standard (FY2019 full year NPAT reduced by $0.11 million to $0.56 million), but how the lease expenses are
categorised in the Profit or Loss Statement is significantly different. In SDL’s case for FY2020, the Company
expects that direct Expenses will be around $0.9 million lower so EBITDA will show as approximately $0.9
million higher than it would otherwise have been under the old accounting treatment. Offsetting that,
Depreciation and Interest expenses are similarly around $0.9 million higher in aggregate. These two effects
largely offset one another at the Net Profit line (there may be small timing differences between the two
accounting standards but these are not expected to be material).
Operational Commentary
Operating revenue grew 24.0% to $15.79 million. All of this growth came from North American operations,
including a new contract with a US multinational organisation. While domestic NZ operations performed
slightly better than expected, revenues nevertheless declined with mail lodgements and print volumes down
around 14%. Recent restructuring and personnel changes have improved the domestic outlook and modest
new business wins have been achieved. However, the overall market continues its structural decline and
industry rationalisation seems inevitable at some point. The Company’s overall gross margin percentage
improved slightly, up 140 basis points to 35.6% on an improved sales mix, and gross margin dollars rose
29.2% to $5.62 million.
SDL has historically operated predominantly in New Zealand with some international software revenue. That
position is changing. This half year result saw international software revenues as a proportion of total
revenue move from around 26% in 1H FY2019 to around 49% in 1H FY2020. Moving into FY2021, and
assuming the software contracts underway deliver as expected, then international software revenue will
increasingly dominate the sales mix. Note that this international software revenue includes two different
business models: in one, SDL is a pure software SaaS provider and earns revenue solely from the customer
utilising the software. In the other, SDL still provides the software on a SaaS basis but also earns revenue
directly related to the software platform by acting as the customer’s provider of a total communications
solution including combinations of print, logistics and postage.
As noted earlier, SG&A costs are well up, rising 27.5% year-on-year (on top of a similar increase the prior
year). The sizeable increases in both years are from a combination of investing in US operations, building out
additional support for a major contract and further hiring for expansion in the US (and also in the UK). The
pipeline of qualified opportunities internationally is very material and some initial contract wins have already
been achieved. Further success in the US market would see a step change in scale for SDL and the Board is
committed to ensuring that adequate resourcing (both for sales and support) is applied to prosecute the
opportunities to the best of the Company’s abilities.
Software & Technology revenues were very strong overall in the first half, up 92.4%, driven largely by a new
contract with a US-based multinational. Excluding this contract, Software’s performance did not reach
expectations. While SaaS revenues continue to show gains, the Company’s activity levels around software-
related services for several clients were notably subdued. We expect some degree of recovery in services
activity during the second half of the financial year. Revenue growth was also aided by a stronger
contribution from DigitalToPrint (DTP).
As noted above, the traditional Digital Imaging & Document Handling revenues declined 20.2% year-on-year
to $2.71 million (1H FY19 $3.40 million, restated, see Note 4 in the Financial Statements). The first half saw
an ongoing increase in the rate at which customers switched to electronic communications, with mail
lodgements down 13.8% and email volumes up 11.3%. 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 switching continues to act as a drag on the Company’s earnings.
The Company advises that it has signed a mutual Disaster Recovery Agreement with a third-party provider

Physical Address
18-24 Canaveral Drive, Rosedale
Auckland 0632, New Zealand

Postal Address
PO Box 301248, Albany
Auckland 0752, New Zealand
Contact
Phone: +64 9 970 7700
Email: info@solutiondynamics.com
www.solutiondynamics.com


for digital print and mail processing. SDL has also established a second site for IT and data processing. The
agreement with the third-party provider completes the disaster recovery process for our mutual clients.
The Company pipeline for Software is exceptionally strong in the US and some recent new business wins
have been achieved. This was despite the focus on successfully implementing the onboarding of a large
contract, which consumed significant management and support time and constrained UK and US sales
efforts. A couple of sizeable recent opportunities have been successful, with commercial terms agreed,
although final contracts have yet to be concluded.
Financial Performance
Earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 34.2% to $1.42
million (1H FY19: $1.06 million) on sales revenue that rose 24.0%. As noted above, reported
EBITDA is affected by the change to lease accounting, although all the figures in the following table
are like-for-like, with 1H FY19 restated to be consistent with the changed accounting standard.

The EBITDA increase stems from two factors. First is the positive effect on Gross Margin dollars from
increased revenue and a more favourable sales mix. Second is the negative offset from the sizeable increase
in SG&A costs needed to support higher international activity levels and significant sales opportunities in the
US in particular.
After the Company acquired DTP in 2018, it applied to NZ Trade & Enterprise (NZTE) for market support to
expand its new US activities. NZTE is supporting part of the additional US costs on a proportionate basis for
up to three years or a maximum of $0.6 million.

Summary Financial PerformanceYr-on-YrYr-on-Yr
(all figures $000)1H FY201H FY19$ Change% Change
Total Revenue15,78512,7263,05924.0%
Cost of Goods Sold10,1688,3771,79121.4%
Gross Margin5,6174,3491,26829.2%
Gross Margin (%)35.6%34.2%
Selling, General & Admin Costs4,2013,29490727.5%
EBITDA1,4161,05536134.2%
EBITDA Margin (%)9.0%8.3%
Depreciation581550315.6%
Amortisation17617331.7%
EBIT65933232798.5%
Net Interest6485-21n.a.
Net Profit before Tax595247348140.9%
Taxation1261111513.5%
Net Profit after Tax469136333244.9%
Revenue AnalysisYr-on-YrYr-on-Yr
(all figures $000)1H FY201H FY19$ Change% Change
Software & Technology9,3654,8674,49892.4%
Digital Imaging & Document Handling2,7133,401-688-20.2%
Outsourced Services3,7074,458-751-16.8%
Total Revenue15,78512,7263,05924.0%

Physical Address
18-24 Canaveral Drive, Rosedale
Auckland 0632, New Zealand

Postal Address
PO Box 301248, Albany
Auckland 0752, New Zealand
Contact
Phone: +64 9 970 7700
Email: info@solutiondynamics.com
www.solutiondynamics.com


The 92.4% growth rate for Software & Technology revenue in the first half was the highlight of the
result and mainly the result of new business activity offset by some slowdown in software-related
services in the UK (expected to begin recovering during the second half). SDL’s pipeline of
opportunities across UK and Europe, but notably in North America, should ensure Software &
Technology has several years of revenue growth ahead. SDL’s hybrid print-on-demand service and
Jupiter’s distributed global print software platform are providing the Company with a strong
competitive advantage and both products currently face minimal competition. We noted a year
ago that SDL’s small scale and geographic distance from our most important growth markets
continued to place pressure on management resources and at some point SDL would require a step
change in costs for both management and in-market sales in the UK and North America. This
additional management and sales/support has now largely been added and is producing positive
results.
Domestically, Digital Imaging in 1H FY2020 continued to be difficult, flowing on from NZ Post price
increases in mid-2018 still exacerbating the rate of switching to electronic communications. The
larger effect on the growth rate in 1H FY2020 was the year-on-year impact of the loss on three
medium sized accounts during FY2019. These were all situations where the customer tendered out
their entire print business and the majority of the print was offset (SDL only does digital print and
was unable to compete for the full tender in each case).
Balance Sheet, Liquidity and Debt
SDL closed the half year with net cash on hand of $2.20 million, up 59% on 1H FY2019 ($1.39
million) and largely reversing the drop in 1H FY2019. A bank overdraft facility of $0.2 million
remains in place but is unused. Capital expenditure was a modest $0.17 million in the half, largely
for new inserting equipment in NZ.


Book value (net assets) increased 9.8% to $4.02 million, largely on improved earnings in the first
half. SDL’s historic equity has been adjusted for the change to the accounting standard for leases.
Working capital remains well managed although some recent contract wins have introduced a
degree of month-to-month and intra-month lumpiness to cash flow. Note from the preceding table
that the NZ IFRS 16 change to lease accounting means the Balance Sheet now includes both “Right
of Use” assets and a corresponding “Right of Use” liability for what SDL owes on the lease contracts.
Selected Balance Sheet and Cashflow Figures
Yr-on-Yr
Yr-on-Yr
(all figures $000)
1H FY20
1H FY19
$ Change
% Change
Net Cash on Hand (net of debt)
2,203
1,385
818
59.1%
Non-current Assets (excl Right of Use Assets)
2,554
2,821
-267
-9.5%
Right of Use Assets
2,361
3,243
-882
-27.2%
Net Other Liabilities (excl Right of Use Asset Liability)
-611
-492
-119
24.2%
Right of Use Liabilities
-2,489
-3,299
810
-24.6%
Net Assets
4,018
3,658
360
9.8%
Cashflow from Operations
Cashflow from Trading
1,288
975
313
32.1%
Movement in Working Capital
689
-333
1,022
-306.9%
Cash Inflow from Operations
1,977
642
1,335
207.9%

Physical Address
18-24 Canaveral Drive, Rosedale
Auckland 0632, New Zealand

Postal Address
PO Box 301248, Albany
Auckland 0752, New Zealand
Contact
Phone: +64 9 970 7700
Email: info@solutiondynamics.com
www.solutiondynamics.com


Dividend
SDL is declaring an interim dividend of 3.0 cents per share, a 50% increase on the prior year.

The dividend is fully imputed and the amount represents a payout ratio of 93.6% of earnings per
share and 68.1% of earnings per share after adding back Amortisation to Net Profit after Tax (i.e.
NPATA). SDL’s agreement with NZTE in relation to assistance with costs for US market development
spending, limits the Company’s dividend payout to 75% of NPATA earnings.
FY 2020 Outlook
The key factor influencing SDL’s expected result for FY2020 (and likely the key factor moving into
FY2021) is the progressive onboarding and ramp up of new international client wins for the
Company’s software solutions.
A key contract with a US multinational organisation has seen initial trials prove successful and
revenue is steadily increasing with full revenue commencing during the second half of FY2020.
Other recent wins in the US may also begin to contribute during the second half of FY2020 although
some uncertainty remains around how quickly these begin to contribute this financial year.
Assuming these contracts are concluded and all new customers are onboarded successfully, then
substantial further growth is likely in FY2021.
Of particular note, Solution Dynamics Inc. (SDL’s US subsidiary) has been notified it has been
selected as the preferred supplier of a comprehensive communications software workflow platform
for a major US-based customer communications software vendor. SDL’s proposed solution
leverages the Company’s Jupiter CCM cloud platform delivered through a software-as-a-service
model for secure print and digital communications management and delivery. SDL expects to
shortly begin negotiations on a multi-year contract and global rollout schedule. If successful,
implementation will likely commence, at the earliest, in the mid-to-late fourth quarter of SDL’s
FY2020. The Company’s updated guidance assumes no contribution from this contract in FY2020.
SDL has previously provided FY2020 guidance for revenue growth of around 20% and EBITDA
broadly in line with FY2018 levels (around $2.3 million) with some upside bias risk to the EBITDA
figure. Note that this EBITDA guidance was based on the historic NZ IAS 17 treatment of leases; the
change to NZ IFRS 16 accounting for leases affects the calculation of EBITDA and no longer makes
this a meaningful comparator with the FY2018 figure. Accordingly, SDL is restating its earnings
guidance approach to net profit after tax (NPAT). FY2020 revenue guidance is raised to in excess of
40% growth over FY2019. Noting that NPAT was $1.3 million in FY2018, SDL is upgrading its FY2020
Earnings and Dividend per ShareYr-on-YrYr-on-Yr
1H FY201H FY19Change% Change
Shares on Issue (000)14,639.814,559.880.00.5%
Earnings per share (cents)3.200.932.27243.0%
Earnings per share (cents) on NPATA4.412.122.28107.6%
Dividend per share (cents)3.002.001.0050.0%
Dividend proportion Imputed100.0%100.0%n.a.n.a.
Payout ratio (on NPATA)68.1%94.2%n.a.n.a.

Physical Address
18-24 Canaveral Drive, Rosedale
Auckland 0632, New Zealand

Postal Address
PO Box 301248, Albany
Auckland 0752, New Zealand
Contact
Phone: +64 9 970 7700
Email: info@solutiondynamics.com
www.solutiondynamics.com


NPAT earnings outlook to be in excess of $2.0 million. This guidance upgrade includes significant
revenue and margin in the last two months of FY2020 and some risk remains around the timing of
these over financial year end.
For further information, please contact:
John McMahon
Chairman
+61-410-411 806

Nelson Siva
Director & Chief Executive Officer
+64-21-415 027

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Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019


Results for announcement to the market
Name of issuer Solution Dynamics Limited
Reporting Period 6 months to 31 December 2019
Previous Reporting Period 6 months to 31 December 2019 (restated)
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$15,785 +24.0%
Total Revenue $15,785 +24.0%
Net profit/(loss) from
continuing operations
$469 +244.9%
Total net profit/(loss) $469 +244.9%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.04166667
Imputed amount per Quoted
Equity Security
$0.03000000
Record Date 27 March 2020
Dividend Payment Date 3 April 2020
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.59467210 $0.58695050
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
The above prior year figures have been restated where
applicable to reflect the transition from NZ IAS 17 to NZ IFRS
16. Please read this in conjunction with the attached results
release and unaudited financial statements for the 6-months
ended 31 December 2019.
Authority for this announcement
Name of person

authorised
to make this announcement
Chris Veale, Chief Financial Officer
Contact person for this
announcement
Chris Veale, Chief Financial Officer
Contact phone number
+64 21 855142

Contact email address
chrisve@solutiondynamics.com

Date of release through MAP

27 February 2020


Audited / Unaudited financial statements accompany this announcement.