Solution Dynamics Limited Analysis

Overview

Solution Dynamics Limited operates in the Customer Communications market (essential mail, interactive marketing communications and on-demand communications). The Company's products and services are represented by two revenue streams:

• Services, includes digital print and mail house processing for mail items such as invoices, statements and promotional material.
• Software & Technology, develops and markets SDL's own software products related to marketing communications, document archiving, document composition and desktop mail solutions.

Solution Dynamics Limited was formed in November 2001 and had its origins in a company called Marketing Data Services Ltd, which was established in 1996. It is listed on NZAX since July 2004 under the code of "SDL". The company has successfully completed a Renounceable Rights Issue in 2011.

Performance

The following information was extracted from Solution Dynamics Limited's full year results, released 28 August 2025:

FY2025 Result Overview

Solution Dynamics Limited (“SDL” or “Company”) recorded a net profit after tax of $2.62 million for FY2025. This was 7.1% lower than the profit of $2.82 million the prior financial year. FY2025 earnings per share was 17.8 cents, down 7.0% from 19.2 cents in FY2024.

The Company’s revenue rose to $41.3 million (up 6.9% from $38.7 million). Some of the increase was the result of a pass through of (very low margin) higher postage charges while the Company’s largest customer saw little business in 2H and its revenue contribution was down 15% overall for the year. The revenue highlight was that the other nine of of SDL’s top ten customers saw strong growth of 21% for the year.

SDL’s New Zealand operations again gained market share in a (still) falling local print and mail market, marked by a continuation of the FY2024 trend of securing ongoing new work from local councils in particular. Some of this is from council customers new to SDL, some is the increasing trend amongst larger councils to outsource print work previously undertaken in-house.

SDL’s International operations generated new business from new accounts following the successful onboarding of a marketing services company in North America. There was also success with new products in the dental market from an existing customer who has embedded SDL’s software in its software solutions. However, this growth was overshadowed by the decline in our largest customer revenue contribution. This resulted in a 3.8% overall reduction of SDL’s total Software & Technology revenue to $24.1 million.

Following the reduction in our largest customer’s revenue the Company swiftly enacted a significant cost restructuring. This started in late 1H and continued through 3Q with the benefits fully seen in the final quarter of FY2025 and it will annualise across FY2026.

Earnings before interest, tax, depreciation and amortisation (“EBITDA”) declined 8.0% to $4.45 million (FY2024 $4.84 million). Gross Profit was 3.8% lower, helped by a general price increase at the start of FY2025. Selling, General and Administration (“SG&A”) expenses were effectively controlled, declining 1.7% over the full year. SG&A was noticeably split over FY2025, rising 6.8% year-onyear in 1H, but then aggressively declining 10.0% year-on-year in 2H following SDL’s restructuring that commenced in late 1H.

Cash flow from operations improved to $4.30 million (FY2024 $3.36 million) and the net cash and shortterm deposit position at year end was $11.19 million (FY2024 $7.95 million). Normalising this for year-end accruals plus adjusting for around $1.3 million of capital expenditure (print inserter equipment) in early FY2026, the current cash position is around $9 – 10 million (about 61 – 68 cents per share).