Solution Dynamics Limited, Annual Meeting 2025

November 10th 2025

Solution Dynamics Limited (SDL)

The company will hold its Annual Shareholders Meeting at 10.30am Thursday 20 November 2025.

The location is the Company’s offices, 18 Canaveral Drive, Albany, Auckland.

You can also join the meeting online at this link.

Company Overview

The company has evolved from mail house and digital printing to a technology communications solutions provider to airlines, financial institutions, fast moving consumer goods organisations, education, government, and utility providers. It has offices in New Zealand, the USA, and the UK. Its two major revenue streams are Services and Software and Technology.

In mid-2023, SDL’s largest customer announced it would issue a Request for Proposal (RFP) that covered the communications services currently provided by SDL. The RFP was part of the customer’s regular review and tendering of its major contracts. SDL responded to the RFP, and in November 2024 announced the customer had not awarded the tender to SDL; they had decided to tender business on a project-by-project basis, with SDL still being able to tender for individual projects.

The Annual Report advises the full profitability impact to only be fully felt in FY26.

 As a result, in December 2024, the company announced a significant restructure to ‘right size’ the business. As part of this process, the Chair John Mahon is no longer taking a fee, and the other Directors fees have been reduced to the 2022 level prior to the last increase.

Current Strategy

The company’s website states, “Our mission is to enhance the way organisations connect with their audiences, fostering stronger relationships and driving down costs.”

Disclaimer

To the maximum extent permitted by law, New Zealand Shareholders Association Inc. (NZSA) will not be liable, whether in tort (including negligence) or otherwise, to you or any other person in relation to this document, including any error in it.

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Key

The following sections calculate an objective rating against criteria contained within NZSA policies.

Governance

NZSA assessment against its key policy criteria are summarised below.

Directors Fees:  SDL does not operate a Director fee pool, with role-based fees approved by shareholders for the Chair and non-executive Directors.

The company’s constitution offers retirement benefits to Directors, a position not supported by NZSA (note that it is not disclosed as to whether any retirement benefits are actually paid). There is no disclosure as to whether share-based payments are issued to Directors.

Special exertion payments are possible at $250/hr – we note this is ‘uncapped’ (i.e., no provision for a fee limit to such payments approved by shareholders). It appears there were no special exertion payments made in FY25.

We commend the Director’s immediate and personal response, by way of a reduction in fees, to the difficulties encountered by the company in FY25. This conduct has positively impacted our overall rating.

Director Share Ownership:  NZSA encourages independent Directors to own shares, but does not support compulsion, based on maximising Director diversity and independence.

Solution Dynamics does not directly disclose as to whether Directors are required to own shares – however, we note that the Annual Report discloses director shareholdings (page 52), with some Directors not owning shares. This implies that there is no compulsion.

We would encourage SDL to make a more explicit disclosure in future.

CEO Remuneration:  The company discloses its remuneration policy on its website, which includes an overview of the remuneration philosophy applicable to the company. There is no separate Remuneration Committee, with remuneration governance falling within the remit of the whole Board.

Incentives: The CEO is paid an Annual Bonus in cash (STI) and appears to participate in a long-term incentive scheme by way of share options.

NZSA encourages fulsome disclosure in relation to any incentive payments made to the CEO, including disclosure of measures (or measure ‘groups’), weightings, targets, and the level of achievement versus target for each component associated with any awards. This methodology is supported by the new NZX Remuneration Reporting Template.

The Annual Report states.”

For the STI, the Annual Report shows the maximum incentive Award (which can be calculated at 65%of base salary). It also notes the key measure: “The CEO’s remuneration comprises a fixed base salary and an annual bonus that is structured based on meeting various tiers of EBITDA.”

The disclosed incentive includes a calculation of value for a share-based option scheme – unfortunately, there is no breakdown of award between STI and LTI.

While note 5.3 of the accounts provides details of the options issued, it is not clear as to whether this relates solely to the CEO or includes other staff.

The actual incentive paid relating to FY25 is not disclosed.

The company does not disclose the gender pay gap and CEO/employee remuneration ratio.

Golden Parachutes: There is no disclosure in the Annual Report. In the interests of transparency, NZSA believes there should be explicit disclosure around the severance terms and notice periods associated with the CEO, including whether specific termination payments are offered.

Director Independence: While four out of five Board members are independent, we note that the Chair (John McMahon) holds a 10.88% share of the company. The NZX Corporate Governance Code recommends an Independent Chair, a position supported by NZSA.

Board Composition:  The Annual Report does not include a skills matrix that attributes skill sets to individual Directors to demonstrate how they contribute to the governance of the company. There are no Director profiles shown in the Annual Report, although these are available on the company website. Other governance roles are not disclosed in the Annual Report.

The nature of the company’s board indicates some commitment to thought, experiential and social diversity, with relevant experience for Solution Dynamics, although given the lack of skills disclosure, this relies heavily on interpretation rather than objective assessment.

Director Tenure:  NZSA looks for evidence of ongoing succession or ‘staggered’ appointment dates that reduce the risks associated with effective knowledge transfer in the event of succession. We also prefer a term maximum of 9-12 years, unless there are exceptional circumstances that may apply.

We note that one Director (Julian Beavis) has served since 2010 and the Chair (John McMahon) has served since 2012, creating some risk for shareholders as to the eventual loss of institutional knowledge. NZSA expects clear statements around succession plans for these Directors We note that McMahon is a significant shareholder (10.88%) in SDL.

Other directors have been appointed between 2016-2019. In discussion, the company noted that like any smaller company, it faces significant ‘key person’ risk on its Board and looks to actively manage this on an ongoing basis. 

With no new Director appointed over the past six years, there is a potential for either a long-serving Board resulting in no renewal or refreshment or a short rotation of existing Directors leading to a potential lose of institutional knowledge. As part of their disclosure and transparency responsibilities NZSA expects Board’s to provide shareholders with assurance as to their succession plans.

ASM Format: Solution Dynamics Limited is holding a ‘hybrid’ meeting, (i.e., physical, and virtual), a format preferred by NZSA as a way of promoting shareholder engagement while maximising participation.

Independent Advice for the Board & Risk Management: NZSA looks for evidence, through disclosures, that a Board has access to appropriate internal and external expertise to support board assurance activities. We also look to see Boards are across their risk management responsibilities.

There is clear disclosure in the Annual Report that Board members can seek external advice to support decision-making. It is less clear as to the extent to which internal assurance staff have unfettered access to the Board.

The company offers some disclosure of financial risks and key strategic and operational risks, although there is limited discussion of mitigations. There is limited disclosure as to the processes supporting the risk management framework, with some disclosure of risk governance included within the Audit & Risk Committee Charter.

Audit

NZSA assessment against its key policy criteria are summarised below.

Audit Independence:  Good disclosure.

Audit Rotation:  The company ensures the Lead Audit Partner is rotated at 5 years as required by the NZX Listing Rules. Baker Tilly Staples Rodway was appointed Auditor in March 2025 replacing Grant Thornton. We appreciate and acknowledge the statement in the Annual Report “The change was made solely for governance reasons as Grant Thorton had served as SDL’s auditor for well beyond the recommended 10-year maximum tenure.”

Environmental Sustainability

While SDL’s market capitalisation is below the threshold requiring mandatory climate-related disclosure requirements, NZSA believes that is still in the best interest of shareholders and the long-term direction of the company to improve the level of disclosure around the qualitative aspects relating to environmental sustainability, namely a discussion on risk/opportunity and the longer-term impact on SDL’s strategy.

In their Corporate Governance statement, with regards to non-financial reporting, Solution Dynamics make the same comment made in FY24: they are “dedicated to using its resources and collaborates closely with its supply chain partners to identify opportunities for minimizing any adverse environmental risks or impacts from its business operations, products and services”.

The company  also notes that given its size, SDL has “not adopted a formal environmental, social and governance (ESG) framework.”

This indicates a ‘broad approach’ to environmental sustainability (supported by NZSA), in taking a proactive approach to disclose other environmental-related risks and opportunities that have an impact on their strategy.

NZSA does not complete RAG assessments on non-Climate Reporting Entities.

Ethical and Social

NZSA assessment against its key policy criteria are summarised below.

Whistleblowing:  Good disclosure.

Political Donations:  We note and appreciate the comprehensive disclosure in the Code of Conduct Policy on the company’s website and would recommend other NZX companies consider adopting this model not only as regards political donations but also as regards all ethical matters.

Financial & Performance

Solution Dynamic’s share price fell from $1.23 to $0.68 (as of 22^nd October 2025) over the last 12 months – a 45% decline. This compares unfavourably with the NZX 50 which rose 4% in the same period. The capitalisation of SDL is $10m placing it 108^th out of 115 companies on the NZX by size and makes it a small company.

¹ per share figures based off actual shares at balance date (not weighted average)

On the 26^th June 2025, SDL provided earnings guidance where they expect FY26 net profit to be in the range of $0.1 million to $0.6 million. “Guidance is provided in the context that there is significant global macroeconomic and political instability at present, along with domestic NZ economic headwinds, making forecasting more difficult than usual”.

This opening paragraph is important in the context of the figures that follow. For FY25, SDL had rising revenue with revenues being up 7% to $41.3m, a slightly lower EBITDA of $4.4m and a solid NPAT of $2.6m was recorded.

EPS of $0.178 was delivered and places the company, on a very low P/E of 4. This low P/E is reflective of the market’s perception of future profitability and places the post balance date earnings guidance in context.

The annual report sheds more light on this and on page 4 they provide a “Major Customer Update”. “The most significant factor in FY2025 was SDL’s largest customer advising it would transition from a single supplier (SDL) model to a multi-vendor (SDL and one other) model, with the full profitability impact to only be fully felt in FY2026”.

The company is in sound financial position with the current ratio at 2.40. The company has no long-term debt except some lease liabilities. The debt-equity ratio continues its downward trajectory to 0.67 and although the company has no interest-bearing debt, this is a function of the proportionally large amounts of current liabilities with respect to the equity figure.

Operating cashflows were robust at $4.3m.

NTA per share is $0.69 and shares no longer trade at premiums to NTA. SDL are valued on the future expectations of their cashflow and the ability to deliver returns, rather than their asset base. The company has recently announced they are going to resume their share buybacks.

SDL reduced their fully imputed dividend substantially to $0.03 for the year. The company has a dividend policy which states they will only pay dividends if they can be fully imputed (a policy we applaud) and currently dividends are capped at a 50% pay-out ratio.

In conjunction with the release of their Financial Results, SDL also provided a 10 page management discussion and analysis.

John McMahon, the current Chair, is the largest shareholder with a 10.88% stake in the company.

Resolutions

Lee Eglinton was appointed to the Board in May 2019. She is an experienced executive holding multiple roles and directorships. Lee’s executive roles have included CEO of a NZ software business, General Manager Australia & NZ of an IT services and consulting business. Prior to that she spent thirteen years at IBM NZ & Australia in a range of roles including Consulting Services, leading the company’s Data Analytics and Information Management practice.

Lee has a broad range of experience across the technology, consumer electronics and telecommunications sectors. Lee is currently the Interim COO for Graph Research Labs (GRL), a symbolic AI software company that creates declarative generators to integrate semantic graphs by instantly creating API’s, Apps and LLM Schema for customers. Lee is a non-Executive Director of several private companies and small business owner and director in the Health and Housing sectors. Lee’s experience includes strategy and business transformation, sales performance, and sales management, and applying technology to business and market challenges. She has a particular focus on organizational culture and building high performing teams. She enjoys Business and individual mentoring and is a member of the NZ Business Mentors organisation.

We will vote undirected proxies IN FAVOUR of this resolution.

Elmar Toime was appointed to the Board February 2016. He is an independent advisor in the postal and logistics sector. Elmar was a former chief executive of New Zealand Post Limited during which period he led the formation of Kiwibank. Subsequent roles included executive deputy chair of Royal Mail, chair of GLS, a major European courier delivery service, and a member of the Deutsche Post DHL supervisory board. He is currently a non-executive director of Qatar Post.

He now lives in Melbourne, Australia, after 20 years in the UK. He has a lifetime achievement award for leadership in the postal industry. Elmar holds degrees in science and economics from the University of Melbourne.

While we will support his re-election he will have served 12 years at the end of that term. We would expect to see some indication of his future tenure as per our remarks above. We note that that eventual succession for Mr. Toime should be considered in the context of the wider Board.

We will vote undirected proxies IN FAVOUR of this resolution.

This is an administrative resolution.

We will vote undirected proxies IN FAVOUR of this resolution.

Proxies

You can vote online or appoint a proxy at https://www.investorvote.com.au/

Instructions are on the Proxy/voting paper sent to you.

Voting and proxy appointments close 10.30am Tuesday 18 November 2025.

Please note you can appoint the Association as your proxy. We will have a representative attending the meeting.

The Team at NZSA