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Solution Dynamics Limited (NZX: SDL) 1H FY2021 Financial Results and Interim Dividend

Thursday 25th February 2021

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Result Overview

Solution Dynamics Limited 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.

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.

Please see the links below for details:

SDL Chairman's & CEO's Report 6-months to 31 Dec '20

SDL Interim Report 2021

SDL Results Announcement Interim FY2021

SDL Distribution Notice Interim Dividend FY2021

Source: Solution Dynamics Limited

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