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NZX-listed communications management technology developer Solution Dynamics is embarking on a major restructuring after the loss of a vital contract.
While the overall impact was still uncertain, management said they believed cost reductions targeted were unlikely to offset what was expected to be the material adverse impact of reduced margin and lost earnings from its largest customer.
“In the short term at least, the impact has the potential to be severe,” chair John McMahon and CEO Patrick Brand told shareholders today.
The restructuring was expected to begin shortly and to accelerate the transition of the business from print and mail to digital communications and software, including leveraging the recent launch of the company’s new multilingual communication tool, GenComm AI.
Solution Dynamics went into a trading halt on Monday to allow time for management to understand the potential impact of the apparent contract loss.
It said at the time that its largest customer had undertaken a tender process that covered customer communications services it provided.
After being told it had not been successful in the tender, a number of issues remained unclear, particularly whether this decision applied to all or part of its services to the customer.
Solution Dynamics had also not received any information about the timing of the hand-over process.
The customer had since advised that it undertook the tender with aim of qualifying another vendor’s capabilities, and
had done so.
“As a result of the debriefing call, Solution Dynamics understands that the customer now expects to tender its communications programme services (software/professional services and print/logistics) on a project by project basis,” the company told shareholders today.
That decision was based on commercial factors, not on performance, McMahon and Brand noted.
“Solution Dynamics has been advised that it will remain a vendor to the customer although it is understood this will be subject to an ongoing per-project contestable basis.”
The company expected to provide an update to its first half 2025 earnings guidance range of $2.2 to $2.6m around mid-December.
“We do not expect be in a position to provide second half FY25 guidance until we have reasonable certainty around the ongoing tender impact, new business secured and restructuring programme progress,” management said.
Trading in Solution Dynamics shares on the NZX has resumed.