17 December 2015

Solution Dynamics Limited (SDL or the Company) advises that stronger-than-expected trading results have been achieved during the seasonally important October/November period. In addition to higher base profitability, a number of other items are contributing to an improved outlook for the first half and full year:
● further print cost efficiencies have been realised;
● confirmation of several new business wins and an increasing degree of certainty around when revenue from these clients is likely to commence;
● additional costs in the UK and New Zealand to support higher levels of business activity;
● SDL has received approval, subject to final contract, from NZ Trade & Enterprise for growth funding support to assist in establishing in-market presence in the UK and Europe. This is to help ensure SDL successfully delivers against the DéjarMail UK health sector contract, as well as contributing towards efforts to secure new DéjarMail customers in the UK and Europe. The growth development funding runs until mid-2018 and will contribute approximately 40% of SDL’s qualifying market development expenses to a maximum reimbursement of $428,000 over that period; and
● some previously expensed software development costs (both internal and external) relating to a print procurement solution will now be capitalised as SDL has reached agreement with the external developer to acquire the software IP. SDL will now obtain full revenue resulting from the software deployment, which is expected to be installed for the customer during the third quarter of FY2016.

A condition of the UK growth funding from NZ Trade & Enterprise was that SDL commit to ensuring it would have sufficient internal funding available to support ongoing investment in UK market development. Consequently, NZ Trade & Enterprise required that the Company’s dividend payout ratio be capped at 75%. Accordingly, the directors have agreed to amend the dividend policy from a payout ratio of at least 75% to a maximum payout ratio of 70-75%.

The combination of stronger trading and the above items means SDL’s first half net profit after tax for FY2016 is likely to be around $600,000. This is approximately 7% ahead of the prior year reported profit (the prior year had no tax liability; this expected result is after providing for tax at a rate of 25-26%). At a net profit before tax level, the expected FY2016 interim result is expected to be approximately 49% ahead of the prior financial year.

SDL previously provided a full year expected profit outlook of net profit after tax in excess of $700,000. The company is now upgrading this outlook to a net profit after tax in excess of $850,000. This outlook is partly contingent on software renewals and upgrades scheduled for the last quarter of the year and there is the usual risk of slippage in the timing of these.

For further information, please contact:
John McMahon
Chairman
+61-(0)410-411 806

Nelson Siva
Managing Director
+64-(0)21-415 027