MAR 2008 - SDL Narrows Deficit with Focus on Higher Margin Business
Highlights for Six Months to 31 December 2007
- Continuing growth in revenue, up 8% to $5.28 million on 2006-07 half year
- Mail house volumes up 17% but margins under pressure
- Growth in high margin revenue streams with international sales of proprietary Déjar archiving product up 200%
- New colour imaging platform now making up 7% of total imaging sales
- EBITDA up 7% to $405,000 after excluding $100,000 gain from sale of imaging equipment
- Operating deficit of $10,000
Business communications outsourcing and document management company, Solution Dynamics, has reported sales and earnings growth and a narrower $10,000 deficit but is disappointed with the result for the six months to 31 December 2007.
SDL Chairman, Maurice Kidd said that while progress had been made in migrating the revenue base to the higher margin and fast growing direct mail, data services, archiving and document management sectors, mailhouse performance was below expectations.
Group revenue was up 8% to $5.28 million on the previous half year despite a downturn of 24.2% in lower margin print, post and freight sales.
“Although we grew higher margin revenue streams by 17% much of the impetus was generated by a significant international sale of SDL’s proprietary Déjar archiving product and new maintenance contracts,” Mr Kidd said. “Sales of our new colour imaging and machine mail insertion services, enabled by the commissioning of the new state of the art laser and production platform, also made an important contribution.”
In the first half EBITDA increased to $405,000, up 7.1% on the corresponding period last year, excluding a $100,000 gain on the sale of imaging equipment relating to the production platform upgrade.
With the adoption of International Financial Reporting Standards (IFRS) in the period, Directors undertook a review of the Déjar goodwill and in their opinion found no asset impairment and accordingly there has been no amortisation or write down in the six months under review. There has also been a write back of the amortisation of $16,000 in the 2006-07 year which was the transition period for IFRS.
“The end result for the half year is a net operating deficit of $10,000 compared to a deficit of $54,000 for the comparative period last year, adjusted for the $100,000 gain from the imaging equipment sale,” Mr Kidd said in releasing the six monthly results.
SDL was now in a stronger competitive position and winning valuable new business as a result of the investment in niche mailhouse and document management products and services and the new colour platform and mail inserter, he said.
While SDL’s mailhouse volumes increased by 17% for the half year margins declined by 8.3%, reflecting constant competitive pressure and increased labour costs. Colour laser sales have risen from zero to 7% of total laser sales and are set to double in the second half on the back of the completion of one of the country’s largest variably imaged colour jobs to date and increased business from new and existing customers.
A highlight for the period under review has been the establishment of a strategic relationship with Australia Post’s PrintSoft Group with Déjar, SDL’s proprietary document archival product, working as the catalyst.
PrintSoft has signed a non-exclusive agreement to distribute Déjar internationally through their established network and recently purchased a worldwide license for Déjar to underpin their global hybrid mail solution, launched in Europe earlier this year. SDL has been selected as the accredited mail provider in New Zealand for this unique solution, MailDirect.
As a result of the $450,000 licensing deal, first half sales of Déjar were up by 200% while maintenance revenue was also increasing to support the growing customer base and expected to more than double by the end of this financial year.
Déjar was continuing to be upgraded to make it more commercial and relevant to business needs with Version 3, featuring a range of software enhancements, expected to attract further sales, particularly in Europe. SDL was also investing in software enhancements and technical, training and sales support resources.
Outlook
Mr Kidd said that despite a generally unsettled market climate there was an encouraging level of demand for SDL’s products and services.
“Our aim is to deliver an improved full year result,” Mr Kidd said. “It will be a challenge and for us to realise the opportunities there will need to be greater discipline in controlling costs, implementing further efficiencies and building volumes, particularly in the core mailhouse business,” he said.
“We have the production platform in place, a more focused sales team, strategic partnerships and the addition of new niche products that complement our comprehensive mailing and data services.”
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