SDL 1H FY2021 Financial Results and Interim Dividend

CHAIRMAN’S & CHIEF EXECUTIVE OFFICER’S REPORT
Result Overview
Solution Dynamics Limited (“SDL” or “Company”) produced an unaudited net profit after tax of $1.45
million for the half year (1H FY2020 $0.47 million), a year-on-year increase of 209%.
This gain in profit stems largely from significant new revenue and gross margin from rollouts of SDL’s
global print and software solution for two major global organisations. This was offset by ongoing
decline in domestic NZ print and mail services and a further increase in Selling, General &
Administration (SG&A) costs to support UK operations and development of the US market
opportunity.
Cash flow from operations was $2.16 million (1H FY2020 $1.29 million). The closing net cash
position at 31 December was $6.06 million (1H FY2020 $2.20 million), noting that approximately a
quarter of this cash represents pre-payments by customers of postage. The Directors have declared
an interim dividend of 7.0 cents per share (1H FY2020 3.0 cents), fully imputed.
Operational Commentary
Operating revenue grew 17.3% to $18.52 million with strong international gains offset by declines in
New Zealand operations. Software & Technology revenue (almost wholly international) increased
39.9% on the back of rollouts of two major contracts the company announced details of at the
annual meeting in October 2020. Gains here were constrained by significant volume weakness in
the UK where a major customer in the dental sector and a downstream mail access provider were
affected by COVID. The overall New Zealand market remains in structural decline and industry
rationalisation seems inevitable at some point.
SG&A costs continue to rise, up 6.2% year-on-year (on top of a 25.7% increase in the prior year first
half). International expansion has seen a greater need for in-market customer support for account
management, applications and DevOps, along with increased New Zealand and international staffing
for software development and IT infrastructure such as cybersecurity. Additional sales staff have
been added in the US and Europe, partly the result of COVID restrictions curtailing travel of New
Zealand-based staff but also to attack new market opportunities.
The Company’s traditional digital print and document handling services market revenue in New
Zealand declined 23.9% year-on-year to $2.07 million (1H FY2020 $2.71 million). The first half saw
an ongoing increase in the rate at which customers switched to electronic communications, with
mail lodgements down 16.7% and email volumes up a disappointing 3.3%. The industry has excess
digital print capacity and rationalisation will inevitably occur; the Company has held discussions with
several market participants, however, there seems broad resistance to be the first mover in
implementing structural change.
SDL’s existing print equipment contract concluded during the first half. The Company has renewed
with the same supplier and upgraded equipment although “click” charges for throughput have
increased modestly on average. The extent of the overall increase will be partly dependant on the
mix of equipment utilisation SDL is able to achieve.

2

SDL has maintained its COVID-related work practices around health monitoring, segregated teams
and controlled facility access. This has helped ensure no staff member has been infected to date.
The effects of COVID on revenue have mainly been seen in SDL’s UK business as noted above, along
with some constraints to certain operations by a number of international clients which lowered
preliminary FY21 revenue growth expectations.
While there have been modest cost savings (notably travel) the net effect from COVID on gross
margin and net profit has been moderately negative in the half year and little respite seems likely
until sometime in FY2022, subject to the effectiveness of various vaccine rollouts underway.
The Company continues to see interest in its post-on-demand (POD) and distributed print solutions
and is currently trialling POD sales activity in the US small-to-medium-business (SMB) market. This
SMB market is currently served largely by hardware solutions so SDL’s software-based solution
should be competitive, although potential customers typically lease (on fixed terms) much of the
hardware, meaning the Company will face longer sales cycles to grow market penetration.
Financial Performance
Earnings before interest, tax, depreciation and amortisation (EBITDA) approximately doubled to
$2.85 million (1H HY2020 $1.42 million) on sales revenue that rose 17.3%.
Summary Financial Performance Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY21 1H FY20 $ Change % Change

Total Revenue 18,522 15,785 2,737 17.3%
Cost of Goods Sold 11,214 10,168 1,046 10.3%
Gross Margin 7,308 5,617 1,691 30.1%
Gross Margin (%) 39.5% 35.6%


Selling, General & Admin Costs 4,463 4,201 262 6.2%
EBITDA 2,845 1,416 1,429 100.9%
EBITDA Margin (%) 15.4% 9.0%

Depreciation 612 581 31 5.3%
Amortisation 150 176 -26 -15.0%
EBIT 2,083 659 1,424 216.1%
Net Interest 27 64 -37 -57.0%
Net Profit before Tax 2,056 595 1,461 245.5%
Taxation 607 126 481 381.7%
Net Profit after Tax 1,449 469 980 208.9%

The EBITDA improvement is partly a reversal of the prior year decline and mostly stems from better
sales mix improving the Gross Margin, partly offset by higher SG&A costs. The Company has
obtained NZ Trade & Enterprise (“NZTE”) support for its US expansion activities and this helped
offset some of the cost expansion in that market. The interim result included a net gain of $0.34

3

million (pre-tax) from realised foreign exchange currency hedges that were protecting part of SDL’s
offshore Gross Margin.
SDL’s taxation rate in 1H FY20 was 29.5% versus 21.2% in the prior period. The Company is incurring
losses in the UK as a result of COVID revenue declines there, and these are not able to be grouped
against profits in other jurisdictions.
Revenue Analysis Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY21 1H FY20 $ Change % Change

Software & Technology 13,099 9,365 3,734 39.9%
Digital Print & Document Handling 2,065 2,713 -648 -23.9%
Outsourced Services 3,358 3,707 -349 -9.4%
Total Revenue 18,522 15,785 2,737 17.3%

SDL’s pipeline of opportunities and sales efforts in the UK, European and US markets is likely to
ensure Software & Technology has several years of revenue growth ahead, although COVID
constraints place uncertainty around this expectation.
Balance Sheet, Liquidity and Debt
SDL closed the half year with net cash on hand of $6.06 million, up 175% on 1H FY2020 ($2.20
million) although around a quarter of this represents customer balances the Company is holding as
prepayment for postage (and customers can ask for this to be returned). A bank overdraft facility of
$0.2 million remains in place but is unused. Capital expenditure was $0.05 million in the half, largely
for minor items of computer equipment.
Selected Balance Sheet and Cashflow
Figures Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY21 1H FY20 $ Change % Change

Net Cash on Hand (net of debt) 6,063 2,203 3,860 175.2%
Non-current Assets (excl Right of Use) 2,048 2,554 -506 -19.8%
Right of Use Assets 900 2,361 -1,461 -61.9%
Net Other Liabilities (excl Right of Use) -2,606 -611 -1,995 326.5%
Right of Use Liabilities -1,036 -2,489 1,453 -58.4%
Net Assets 5,369 4,018 1,351 33.6%

Cashflow from Trading 1,887 1,288 599 46.5%
Movement in Working Capital 651 689 --38 -.5.5%
Cash Inflow from Operations 2,538 1,977 561 28.4%

Book value (net assets) increased 33.6% to $5.37 million, mainly the effect of higher first half
earnings. Working capital remains reasonably well managed and SDL has not seen any bad or
doubtful debt issues arising as a result of COVID.

4

Dividend
SDL has declared an interim dividend of 7.0 cents per share, a 133% on the prior year.
Earnings and Dividend per Share Yr-on-Yr Yr-on-Yr
1H FY21 1H FY20 Change % Change

Shares on Issue (000) 14,639.8 14,639.8 0 0.0%

Earnings per share (cents) 9.89 3.20 6.69 208.9%
Earnings per share (cents) on NPATA (a) 10.92 4.41 6.51 147.8%

Dividend per share (cents) 7.00 3.00 4.00 133.3%
Dividend proportion Imputed 100.0% 100.0% n.a. n.a.
Payout ratio (on NPATA) 64.1% 68.1% n.a. n.a.
(a) NPATA is Net Profit After Tax plus Amortisation (i.e. adding back Amortisation to net profit). This is non-
GAAP measure of earnings agreed with NZTE for maximum dividend payout ratio purposes.
The dividend is fully imputed and the amount represents a payout ratio of 70.7% of earnings per
share (and 64.1% of NPATA). The new agreement with NZTE for US market development support
continues to limit SDL to a dividend payout ratio of 75% of NPATA.
FY 2021 Outlook
As expected, the key factor contributing to SDL’s expected FY2021 outlook has been the progressive
onboarding and ramp up of new client wins for the Company’s Software & Technology services and
products internationally. The scale of various phases of onboarding and projects for a number of
these clients has introduced a degree of lumpiness into revenue and earnings, which has been
further affected by COVID-related delays and uncertainty.
SDL’s New Zealand business continues to suffer the industry-wide pressure of declining physical
volumes, partially offset by modest new business gains. The Company’s international Software &
Technology platforms are continuing to expand, particularly in North America. Activity levels at
SDL’s UK customers remains well down on the prior year although is around budget. Additional
costs are currently being incurred as SDL is increasing its investment globally in both in sales channel
development and customer support infrastructure (including developers, DevOps and cybersecurity)
to maintain growth momentum and deliver expanded software functionality requirements that
clients are requesting.
SDL reiterates its prior guidance of full year FY2021 net profit after tax in the range of $2.0 to $2.5
million. This outlook assumes little recovery in lower international volumes in the UK and that new
client projects and onboarding activities proceed as currently planned. Significant volatility is
possible around the guidance range and the predominant likely causes of volatility (including world
health and macroeconomic outlooks) are in many cases beyond the Company’s control.

---

Simplifying Business
Interim Report 2021

Interim
Report
2021
Highlights for Six Months
to 31 December 2020
> Net profit after tax increased 209%
to $1.45 million
> Software & technology revenues
grew 40% to $13.1 million, with
strong pipeline of opportunities
> EBITDA increased 101% to $2.85
million
> Cash flow from operations increased
$0.56 million to $2.53 million and
net cash at 31 December 2020 was
$6.1 million
> Interim dividend 7.0 cents per share,
fully imputed (up from 3.0 cents the
prior year)
> FY2021 profit guidance maintained
in the range of $2.0-2.5 million
| 2 |

Highlights for Six Months to 31 December 2020 .............................. 2
Chairman’s & Chief Executive Officer’s Report ................................ 4
Consolidated Financial Statements for the
Six Month Period Ended 31 December 2020
Consolidated Statement of Profit or Loss (Unaudited) ...........................8
Consolidated Statement of Comprehensive Income (Unaudited) .................8
Consolidated Statement of Changes In Equity (Unaudited) ......................9
Consolidated Statement of Financial Position (Unaudited) ......................10
Consolidated Statement of Cash Flows (Unaudited) ...........................11
Notes to the Condensed Financial Statements (Unaudited) .....................12
Company Directory .......................................................16
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
$1.45 million for the half year (1H FY2020 $0.47 million), a year-on-year increase of 209%.
This gain in profit stems largely from significant new revenue and gross margin from rollouts of
SDL’s global print and software solution for two major global organisations. This was offset by
ongoing decline in domestic NZ print and mail services and a further increase in Selling, General
& Administration (SG&A) costs to support UK operations and development of the US market
opportunity.
Cash flow from operations was $2.54 million (1H FY2020 $1.98 million). The closing net
cash position at 31 December was $6.06 million (1H FY2020 $2.20 million), noting that
approximately a quarter of this cash represents pre-payments by customers of postage. The
Directors have declared an interim dividend of 7.0 cents per share (1H FY2020 3.0 cents), fully
imputed.
Operational Commentary
Operating revenue grew 17.3% to $18.52 million with strong international gains offset
by declines in New Zealand operations. Software & Technology revenue (almost wholly
international) increased 39.9% on the back of rollouts of two major contracts the company
announced details of at the annual meeting in October 2020. Gains here were constrained
by significant volume weakness in the UK where a major customer in the dental sector and a
downstream mail access provider were affected by COVID. The overall New Zealand market
remains in structural decline and industry rationalisation seems inevitable at some point.
SG&A costs continue to rise, up 6.2% year-on-year (on top of a 27.5% increase in the prior
year first half). International expansion has seen a greater need for in-market customer support
for account management, applications and DevOps, along with increased New Zealand and
international staffing for software development and IT infrastructure such as cybersecurity.
Additional sales staff have been added in the US and Europe, partly the result of COVID
restrictions curtailing travel of New Zealand-based staff but also to attack new market
opportunities.
| 4 |

The Company’s traditional digital print and document handling services market revenue in New
Zealand declined 23.9% year-on-year to $2.07 million (1H FY2020 $2.71 million). The first half
saw an ongoing increase in the rate at which customers switched to electronic communications,
with mail lodgements down 16.7% and email volumes up a disappointing 3.3%. The industry
has excess digital print capacity and rationalisation will inevitably occur; the Company has held
discussions with several market participants, however, there seems broad resistance to be the
first mover in implementing structural change.
SDL’s existing print equipment contract concluded during the first half. The Company has
renewed with the same supplier and upgraded equipment although “click” charges for
throughput have increased modestly on average. The extent of the overall increase will be partly
dependant on the mix of equipment utilisation SDL is able to achieve.
SDL has maintained its COVID-related work practices around health monitoring, segregated
teams and controlled facility access. This has helped ensure no staff member has been infected
to date. The effects of COVID on revenue have mainly been seen in SDL’s UK business as noted
above, along with some constraints to certain operations by a number of international clients
which lowered preliminary FY21 revenue growth expectations.
While there have been modest cost savings (notably travel) the net effect from COVID on
gross margin and net profit has been moderately negative in the half year and little respite
seems likely until sometime in FY2022, subject to the effectiveness of various vaccine rollouts
underway.
The Company continues to see interest in its post-on-demand (POD) and distributed print
solutions and is currently trialling POD sales activity in the US small-to-medium-business (SMB)
market. This SMB market is currently served largely by hardware solutions so SDL’s software-
based solution should be competitive, although potential customers typically lease (on fixed
terms) much of the hardware, meaning the Company will face longer sales cycles to grow market
penetration.
| 5 |

Financial Performance
Earnings before interest, tax, depreciation and amortisation (EBITDA) approximately doubled to
$2.85 million (1H HY2020 $1.42 million) on sales revenue that rose 17.3%.
Summary Financial Performance Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY21 1H FY20 $ Change % Change
Total Revenue 18,522 15,785 2,737 17.3%
Cost of Goods Sold 11,214 10,168 1,046 10.3%
Gross Margin 7,308 5,617 1,691 30.1%
Gross Margin (%) 39.5% 35.6%
Selling, General & Admin Costs 4,463 4,201 262 6.2%
EBITDA 2,845 1,416 1,429 100.9%
EBITDA Margin (%) 15.4% 9.0%
Depreciation 612 581 31 5.3%
Amortisation 150 176 -26 -15.0%
EBIT 2,083 659 1,424 216.1%
Net Interest 27 64 -37 -57.0%
Net Profit before Tax 2,056 595 1,461 245.5%
Taxation 607 126 481 381.7%
Net Profit after Tax 1,449 469 980 208.9%
The EBITDA improvement is partly a reversal of the prior year decline and mostly stems from
better sales mix improving the Gross Margin, partly offset by higher SG&A costs. The Company
has obtained NZ Trade & Enterprise (“NZTE”) support for its US expansion activities and this
helped offset some of the cost expansion in that market. The interim result included a net gain
of $0.34 million (pre-tax) from realised foreign exchange currency hedges that were protecting
part of SDL’s offshore Gross Margin.
SDL’s taxation rate in 1H FY20 was 29.5% versus 21.2% in the prior period. The Company is
incurring losses in the UK as a result of COVID revenue declines there, and these are not able to
be grouped against profits in other jurisdictions.
| 6 |

Revenue Analysis Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY21 1H FY20 $ Change % Change
Software & Technology 13,099 9,365 3,734 39.9%
Digital Print & Document Handling 2,065 2,713 -648 -23.9%
Outsourced Services 3,358 3,707 -349 -9.4%
Total Revenue 18,522 15,785 2,737 17.3%
SDL’s pipeline of opportunities and sales efforts in the UK, European and US markets is likely
to ensure Software & Technology has several years of revenue growth ahead, although COVID
constraints place uncertainty around this expectation.
Balance Sheet, Liquidity and Debt
SDL closed the half year with net cash on hand of $6.06 million, up 175% on 1H FY2020 ($2.20
million) although around a quarter of this represents customer balances the Company is holding
as prepayment for postage (and customers can ask for this to be returned). A bank overdraft
facility of $0.2 million remains in place but is unused. Capital expenditure was $0.05 million in
the half, largely for minor items of computer equipment.
Selected Balance Sheet and Cashflow Figures Yr-on-Yr Yr-on-Yr
(all figures $000) 1H FY21 1H FY20 $ Change % Change
Net Cash on Hand (net of debt) 6,063 2,203 3,860 175.2%
Non-current Assets (excl Right of Use) 2,048 2,554 -506 -19.8%
Right of Use Assets 900 2,361 -1,461 -61.9%
Net Other Liabilities (excl Right of Use) -2,606 -611 -1,995 326.5%
Right of Use Liabilities -1,036 -2,489 1,453 -58.4%
Net Assets 5,369 4,018 1,351 33.6%
Cashflow from Trading 1,887 1,288 599 46.5%
Movement in Working Capital 651 689 -38 -.5.5%
Cash Inflow from Operations 2,538 1,977 561 28.4%
Book value (net assets) increased 33.6% to $5.37 million, mainly the effect of higher first half
earnings. Working capital remains reasonably well managed and SDL has not seen any bad or
doubtful debt issues arising as a result of COVID.
| 7 |

Dividend
SDL has declared an interim dividend of 7.0 cents per share, a 133% on the prior year.
Earnings and Dividend per Share Yr-on-Yr Yr-on-Yr
1H FY21 1H FY20 Change % Change
Shares on Issue (000) 14,639.8 14,639.8 0 0.0%
Earnings per share (cents) 9.89 3.20 6.69 208.9%
Earnings per share (cents) on NPATA
(a)
10.92 4.41 6.51 147.8%
Dividend per share (cents) 7.00 3.00 4.00 133.3%
Dividend proportion Imputed 100.0% 100.0% n.a. n.a.
Payout ratio (on NPATA) 64.1% 68.1% n.a. n.a.
(a) NPATA is Net Profit After Tax plus Amortisation (i.e. adding back Amortisation to net profit). This is non-GAAP measure of
earnings agreed with NZTE for maximum dividend payout ratio purposes.
The dividend is fully imputed and the amount represents a payout ratio of 70.7% of earnings
per share (and 64.1% of NPATA). The new agreement with NZTE for US market development
support continues to limit SDL to a dividend payout ratio of 75% of NPATA.
FY 2021 Outlook
As expected, the key factor contributing to SDL’s expected FY2021 outlook has been the
progressive onboarding and ramp up of new client wins for the Company’s Software &
Technology services and products internationally. The scale of various phases of onboarding and
projects for a number of these clients has introduced a degree of lumpiness into revenue and
earnings, which has been further affected by COVID-related delays and uncertainty.
SDL’s New Zealand business continues to suffer the industry-wide pressure of declining physical
volumes, partially offset by modest new business gains. The Company’s international Software &
Technology platforms are continuing to expand, particularly in North America. Activity levels at
SDL’s UK customers remains well down on the prior year although is around budget. Additional
costs are currently being incurred as SDL is increasing its investment globally in both in sales
channel development and customer support infrastructure (including developers, DevOps and
cybersecurity) to maintain growth momentum and deliver expanded software functionality
requirements that clients are requesting.
| 8 |

SDL reiterates its prior guidance of full year FY2021 net profit after tax in the range of $2.0
to $2.5 million. This outlook assumes little recovery in lower international volumes in the UK
and that new client projects and onboarding activities proceed as currently planned. Significant
volatility is possible around the guidance range and the predominant likely causes of volatility
(including world health and macroeconomic outlooks) are in many cases beyond the Company’s
control.
| 9 |

(NZ$ in thousands, except per share amounts)
Operating revenue 17,697 15,573 32,140
Grant income 825 212 1,890
Total income 18,522 15,785 34,030
Expenses
Employee costs 3,808 4,003 7,621
Research & development 613 332 1,077
Directors fees & salaries 445 222 570
Print & other outsource expenses 2,708 3,425 6,179
Other expenses 8,103 6,387 14,229
Total Expenses 15,677 14,369 29,676
Earnings before interest, tax,
depreciation & amortisation (EBITDA) 2,845 1,416 4,354
Depreciation 612 581 1,151
Amortisation of intangible assets (software) 150 176 330
Net Interest 27 64 92
Profit before income tax 2,056 595 2,781
Income tax 607 126 915
Net profit after income tax 1,449 469 1,866
Cents Cents Cents
Basic earnings per share 9.9 3.2 12.7
Diluted earnings per share 9.7 3.3 12.6
6 MONTHS
ENDED
31 DEC
2020

6 MONTHS
ENDED
31 DEC
2019
AUDITED
YEAR ENDED
30 JUN
2020
Consolidated Statement of
Profit or Loss (Unaudited)
For the six months ended 31 December 2020
| 10 || 10 |

(NZ$ in thousands, except per share amounts)

Net operating profit after income tax 1,449 469 1,866
Exchange differences on translation
of foreign operations (103) 12 (53)
Total comprehensive income for the year 1,346 481 1,813
6 MONTHS
ENDED
31 DEC
2020

6 MONTHS
ENDED
31 DEC
2019
AUDITED
YEAR ENDED
30 JUN
2020
Consolidated Statement of
Comprehensive Income (Unaudited)
For the six months ended 31 December 2020
| 11 || 11 |

(NZ$ in thousands)
Consolidated Statement of
Changes in Equity (Unaudited)
For the six months ended 31 December 2020
SHARE
CAPITAL
EMPLOYEE

SHARE
PLAN
CURRENCY

TRANSLATION
RESERVE
ACCUM-

ULATED
LOSSES
TOTAL
EQUITY
Balance 1 July 2019 (restated) 5,413 7 (15) (1,583) 3,822
Issue of shares to employees - 8 - 8
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
Issue of shares to employees - 14 - 14
Transactions with owners - 14 - - 14
Dividend - - - (439) (439)
Profit for the year after tax - - 1,365 1,365
Other comprehensive (loss) income - - (65) - (65)
Total comprehensive income - - (65) 926 861
Balance 30 June 2020 (Audited) 5,413 29 (68) (481) 4,893
Issue of shares to employees - 9 - 9
Transactions with owners - 9 - - 9
Dividend - - - (879) (879)
Profit for the period after tax - - (103) 1,449 1,346
Total comprehensive income - - (103) 570 467
Balance 31 December 2020 5,413 38 (171) 89 5,369
| 12 |

Consolidated Statement of
Financial Position (Unaudited)
As at 31 December 2020
AS AT
31 DEC
2020


AS AT
31 DEC
2019
AUDITED
AS AT
30 JUN
2020
Current Assets
Cash and cash equivalents 6,063 2,203 5,012
Trade & other receivables 2,600 2,894 4,838
Inventories and work in progress 139 215 267
Prepayments 161 226 200
Total Current Assets 8,963 5,538 10,317
Current Liabilities
Trade creditors 1,439 1,961 2,511
Other current liabilities 3,074 760 4,131
Other non-financial liabilities 228 694 72
Employee benefit liabilities 758 520 666
Right of use lease liability 784 703 802
Deferred tax liability 7 11 229
Total Current Liabilities 6,290 4,649 8,411
Working Capital 2,673 889 1,906
Non-Current Assets
Capital works in progress 188 174 188
Property, plant & equipment 413 1,096 525
Right of use assets 900 1,898 1,406
Intangible assets 386 686 536
Goodwill 1,061 1,061 1,061
Total Non-Current Assets 2,948 4,915 3,716
Non-Current Liabilities
Right of use lease liability 252 1,786 729
Total Non-Current Liabilities 252 1,786 729
Net Assets 5,369 4,018 4,893
continued...
(NZ$ in thousands)
| 13 |

Consolidated Statement of
Financial Position (Unaudited)
CONTINUED
As at 31 December 2020
AS AT
31 DEC
2020

AS AT
31 DEC
2019
AUDITED
AS AT
30 JUN
2020
Equity
Share capital 5,413 5,413 5,413
Employee share option plan 38 15 29
Foreign currency translation reserve (171) (3) (68)
Accumulated losses 89 (1,407) (481)
Total Equity 5,369 4,018 4,893
For and on behalf of the Board
John McMahon Andy Preece
Director (Chairman) Director
Date: 25 February 2021
| 14 |

Consolidated Statement of
Cash Flows (Unaudited)
For the six months ended 31 December 2020
6 MONTHS
TO 31 DEC
2020

6 MONTHS
TO 31 DEC
2019
AUDITED
YEAR TO
30 JUN
2020
Cash Flow from Operating Activities
Cash was provided from:
Receipts from sales 20,677 17,313 35,296
Other revenue 825 212 1,890
21,502 17,525 37,186
Cash was applied to:
Payments to suppliers 13,366 10,870 21,560
Payments to employees 5,533 4,060 8,730
GST paid to Inland Revenue 65 618 1,130
18,964 15,548 31,420
Net Cash Inflow from Operating Activities 2,538 1,977 5,766
Cash Flow from Investing Activities
Cash was applied to:
Purchase of property, plant & equipment
& capital works in progress 53 172 216
Purchase of software & intangible assets - 2 6
Net Cash (Outflow) from Investing Activities (53) (174) (222)
Cash Flow from Financing Activities
Cash was applied to:
Payment of dividends 879 293 732
Interest paid 27 64 124
Finance lease liabilities 528 425 858
1,434 782 1,714
continued...
(NZ$ in thousands)
| 15 |

Consolidated Statement of
Cash Flows (Unaudited)
CONTINUED
For the six months ended 31 December 2020
6 MONTHS
TO 31 DEC
2020

6 MONTHS
TO 31 DEC
2019
AUDITED
YEAR TO
30 JUN
2020
Net Cash (Outflow) from Financing Activities (1,434) (782) (1,714)
Net change in cash and cash equivalents 1,051 1,021 3,830
Add cash & cash equivalents held at beginning of year 5,012 1,182 1,182
Finance Facility and Cash Balance at End of Year 6,063 2,203 5,012
Reconciliation of net deficit after income tax for
he year with net cash inflow/ (outflow) from
operating activities
Net surplus after income tax 1,449 469 1,866
Interest expense (reclassified as financing activity) 27 64 92
Add non-cash items:
Depreciation & amortisation of assets 762 757 1,481
(Gain) on foreign exchange - (18) (1,356)
Bad and doubtful debts (35) (7) 19
Other non-cash items (316) 23 190
Cash Flow from Trading 1,887 1,288 2,292
Add movements in Working Capital 651 689 3,474
Net Cash Inflow from Operating Activities 2,538 1,977 5,766
| 16 |

Notes to the Condensed Financial Statements
(Unaudited)
For the six months ended 31 December 2020
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 2020 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 (NZ IAS 34) and IAS 34 “Interim Financial Reporting”
(IAS 34). 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 2020.
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 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 2020 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
2020 have also been included.
The unaudited interim financial statements for the Group for the six months ended 31
December 2020 were authorised for issue on 25 February 2021 in accordance with a resolution
of the directors of the Company.
| 17 |

Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2020
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 2020.
Certain comparative information has been reclassified to conform with the current period’s
classification.
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 2020.
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; Software & Technology, Outsource Services and 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.
| 18 |

»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.
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 & 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.
| 19 |

Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2020
6 months to 6 months to Year to
(NZ$ in thousands) December 2020 December 2019 June 2020
Software & Technology 13,099 71% 9,365 59% 22,012 65%
Digital Printing &
Document Handling Services 2,065 11% 2,713 17% 4,568 13%
Outsourced services 3,358 18% 3,707 24% 7,450 22%
Total income 18,522 100% 15,785 100% 34,030 100%
Less cost of sales 11,214 61% 10,168 64% 20,571 60%
Gross margin 7,308 39% 5,617 36% 13,459 40%
Selling, general &
administration 4,463 24% 4,201 27% 9,105 27%
Earnings before interest,
tax, depreciation &
amortisation 2,845 15% 1,416 9% 4,354 13%
Depreciation 612 3% 581 4% 1,151 4%
Amortisation 150 1% 176 1% 330 1%
Interest 27 0% 64 0% 92 0%
Income tax 607 3% 126 1% 915 2%
Operating Profit after
income tax 1,449 8% 469 3% 1,866 6%
Segment Assets
Assets are not segmented between service streams.
Information about Major Customers
Included in revenues for Solution Dynamics of $18.522 million (2019: $15.785 million) are
services revenues of $6.399 million (2019: $2.969 million) which arose from sales to the
Company’s largest customer.
Geographical Information
The Group has customers in New Zealand, Australia, United States of America and Europe.
| 20 |

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) 2020 2019 2020 2020 2019 2020
New Zealand 7,633 8,066 16,687 2,905 4,906 3,613
Australia 199 238 484 - - -
United States of America 9,718 5,095 12,625 29 - 50
Europe 972 2,386 4,234 14 9 53
Total 18,522 15,785 34,030 2,948 4,915 3,716
5. CASH & CASH EQUIVALENTS
As at As at As at
31 Dec 31 Dec 30 June
(NZ$ in thousands) 2020 2019 2020
Cash and cash equivalents 6,063 2,203 5,012
Total Finance Facility and Cash 6,063 2,203 5,012
Solution Dynamics has an overdraft facility in place with the ANZ Bank at an interest rate of
6.95% p.a. (2019: 7.7%). 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 2019: $200,000). The Group now holds a net cash position with no bank debt (2019: $Nil).
At the end of the reporting period the Bank provided commercial guarantees totalling $65,000
(2019: $65,000) to the Group’s suppliers.
6. SHARE CAPITAL & SHARE-BASED PAYMENTS
Solution Dynamics Limited has 14,639,810 ordinary shares (2019: 14,639,810 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.
| 21 |

Notes to the Condensed Financial Statements (Unaudited) CONTINUED
For the six months ended 31 December 2020
Number of Shares
Shares in 000’s As at As at As at
31 Dec 31 Dec 30 June
2020 2019 2020
Shares Issued and Fully Paid:
- Beginning of the Period 14,640 14,640 14,560
- Share Issue (exercise of options) - - 80
Shares Issued and Fully Paid 14,640 14,640 14,640
Employee Share Option Plan:
- Beginning of the Period 160 160 160
- Granted 80 80 80
- Vested - - -
- Lapsed (on resignation of staff member) - - (80)
Shares Authorised for Share-based Payments 240 240 160
Total Shares Authorised at the end of the Period 14,880 14,880 14,800
The 240,000 options outstanding (2019: 240,000) were at a weighted average exercise price of
$1.98 (2019: $1.68). 80,000 options are eligible to be exercised from January 2022 with 80,000
options eligible to be exercised from September 2022 and 80,000 eligible to be exercised from
November 2023.
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 2020 to 31 December 2020 were as follows:
• Key management were paid $1,153,350 (as employees of Solution Dynamics Limited)
during the period (2019: $424,216) and were owed $201,700, including annual leave,
(2019: $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 25 February 2021, the directors resolved to pay a fully imputed interim
dividend of 7.0 cents per share, amounting to $1,024,787 (2019: the directors approved the
payment of a fully imputed interim dividend of 3.0 cents per share, amounting to $439,194).
There were no other significant events after balance date.
| 22 |

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

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

---

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 2020
Previous Reporting Period 6 months to 31 December 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$18,522 +17.3%
Total Revenue $18,522 +17.3%
Net profit/(loss) from
continuing operations
$1,449 +208.9%
Total net profit/(loss) $1,449 +208.9%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.09722222
Imputed amount per Quoted
Equity Security
$0.07000000
Record Date 12 March 2021
Dividend Payment Date 26 March 2021
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.71475410 $0.59467210
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please read this in conjunction with the attached results release
and unaudited financial statements for the 6-months ended 31
December 2020.
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

25 February 2021


Audited / Unaudited financial statements accompany this announcement.

---

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 12 March 2021
Ex-Date (one business day before the
Record Date)
11 March 2021
Payment date (and allotment date for
DRP)
26 March 2021
Total monies associated with the
distribution
1

$1,024,786.70 (14,639,810 shares @ $0.070000000 / share)
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.09722222
Gross taxable amount
3
$0.09722222
Total cash distribution
4
$0.07000000
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
$0.02722222
Resident Withholding Tax per
financial product
$0.00486111
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

25 February 2021





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