Climate Change Data

Environmental Metrics

Social Achievements

• The Directors would like to thank staff for their assistance during restructuring and cost cutting processes.
• The Directors thank staff, including international staff, who have had to regularly work beyond regular work hours.

Governance Achievements

• Migrated listing to the NZX main board.
• Updated its Constitution to comply with more recent NZX Listing Rules.
• Established a formal Audit & Risk Committee.
• Produced a range of governance and policy statements (available on the Company’s website).
• Added two directors: Andy Preece and Lee Eglinton.

Climate Goals & Targets

Environmental Challenges

• Loss of three medium-sized contracts due to customers moving to single-source suppliers offering offset printing (SDL only offers digital printing).
• NZ Post's postage price hike accelerated migration from paper to electronic delivery, impacting transactional mail volumes (about half of SDL's domestic volume).
• Pressure on margins in New Zealand operations due to volume declines and cost reduction lag.
• DTP (acquired business) incurred greater than expected losses in the short term.
• Industry-wide decline in general mail volume, exacerbated by NZ Post price increases.
• Excess printing capacity in the mail house physical print sector.
• Increased competition for lower volumes may spill over into pricing and margin pressure.
• Loss of one or more top five customers could materially affect financial results.
• Maintaining adequate levels of software quality control.
• IT and data security risks.
• Operational risk of a single-site facility for digital imaging operations.
• Reliance on third-party distributors for software products, especially in international markets.

Mitigation Strategies

• Implementing a cost savings programme in New Zealand.
• Investing to support and accelerate international expansion.
• Expansion into the US market, growing sales pipeline.
• Developing alternative sourcing strategies (not explicitly stated, but implied by the discussion of risks and opportunities).
• Transitioning print jobs from cut-sheet printers to a continuous printer for efficiency benefits.
• Adding value through technology offerings.
• Discussions with various participants in the print sector (though not yet leading to solutions).
• Having a number of clients under contract and expecting revenue growth outside these clients (particularly from DéjarMail).
• Regularly reviewing IT and data security arrangements.
• Investigating reciprocal disaster recovery plans with other printers.
• Exploring DR options.
• Increasing investment in its own direct sales channels in the UK and US.
• Securing a market development grant from NZ Trade and Enterprise to assist with US expansion costs.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: NZ IFRS

Third-party Assurance: Grant Thornton New Zealand Audit Partnership

Environmental Metrics

Social Achievements

• Ensured no staff member was infected by COVID-19 through strict health monitoring and work practices.

Climate Goals & Targets

Environmental Challenges

• COVID-19 revenue and gross margin headwinds, significantly impacting UK revenues and slightly affecting NZ revenues.
• Structural decline in mail volumes, exacerbated by COVID-19 restrictions.
• Increasing print margin pressure and higher risk of business loss in the New Zealand market due to competition.
• Risk of losing key domestic and international contracts.
• Maintaining appropriate levels of software development quality control and sufficient staff for software delivery and support.
• IT and data security risks.
• Operational risk of a single-site facility for New Zealand operations.
• Reliance on channel partners for international software sales.
• Global health and economic uncertainty.

Mitigation Strategies

• Strict health monitoring and effective work practices to ensure staff safety during COVID-19.
• Return of New Zealand government wage subsidy after revenue exceeded initial projections.
• Cost savings from reduced travel and rent relief.
• Investment in international sales and support personnel.
• Reciprocal disaster recovery plan with another printer and backup capability with Fuji Xerox DMS.
• Continued monitoring of world health and macroeconomic outlooks.
• Investment in sales channel development and customer support infrastructure.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: NZ IFRS

Third-party Assurance: Grant Thornton New Zealand Audit Partnership

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Not disclosed

Social Achievements

• Continued COVID-19 monitoring and safety policies, ensuring no staff infection.

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• COVID-19 caused a slump in UK revenues and constrained volumes in developing markets.
• Shortage of skills across the technology sector adding cost pressures.
• Declining physical mail market volumes in New Zealand, especially transactional mail.
• Excess printing capacity in the New Zealand mail house sector.
• Risk of losing key domestic and international contracts.
• Cyber and data security risks.
• Reliance on distribution channel partners for international markets.
• Global health and economic uncertainties.

Mitigation Strategies

• COVID-19 safety policies (segregated teams, work from home, health monitoring).
• Investment in personnel in New Zealand and internationally.
• Value-added technology offerings.
• Renewal of a major print and mail contract.
• Regular review of IT and data security arrangements with external advisors.
• Reciprocal disaster recovery plan with another printer.
• Ensuring software meets channel partner requirements.
• Monitoring world health and macroeconomic outlooks.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Diversity
• Environmental Responsibility
• Human Rights
• Labor Standards

Social Achievements

• Commitment to a culture that actively supports diversity and inclusiveness and prevents or eliminates discrimination.

Governance Achievements

• Updated Share Trading Policy in May 2019.
• Established an Audit and Risk Committee.

Climate Goals & Targets

Supply Chain Management

Responsible Procurement

• Actively working with supply chain partners to reduce negative environmental risk or impact.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: NZX Corporate Governance Best Practice Code

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Not disclosed

Social Achievements

• Implemented a “living wage” policy

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Declining physical mail volumes in New Zealand, especially transactional mail.
• Rapidly increasing postage rates accelerating customers' switch to digital.
• Difficult macroeconomic conditions and sales underperformance in international markets.
• Loss of one or more key domestic contracts could place material pressure on local profitability.
• Loss of one or more of the top five customers (accounting for 59% of revenue) would materially affect financial results.
• Maintaining appropriate levels of software development quality control and sufficient, well-trained staff for software delivery and support.
• Cyber and data security risks.
• Operational risk of a single-site facility for New Zealand print and mail house production.
• Reliance on distribution channel partners for marketing software products internationally.
• Uncertainty in the global macroeconomic environment.

Mitigation Strategies

• Refreshed focus on new business activity in New Zealand, staff changes, and sales team restructuring.
• Broad-based price increases in New Zealand to offset inflation.
• Focus on global clients with global opportunities and avoiding single-country applications.
• Winning a large software and managed services contract with a “Big Four” Business Process Outsourcer.
• Improved office space to improve staff morale and engagement.
• Updated systems to improve efficiency and productivity (estimating, ordering, invoicing, production management, ERP/accounting, CRM).
• Reciprocal disaster recovery plan with another printer and backup capability with a major print equipment supplier.
• Regular review of IT and data security arrangements with external consultants.
• Aiming to grow SaaS platform revenue faster than print services by focusing on digital transformation.
• Narrowing focus to key vertical markets internationally where competitive advantage exists.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Long-term arrangements with key suppliers (e.g., NZ Post)

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: NZ IFRS

Certifications: Null

Third-party Assurance: Grant Thornton New Zealand Audit Limited

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Declining physical mail volumes in New Zealand and worldwide, especially for transactional mail.
• Increased postage rates.
• Risk of losing key domestic contracts.
• Potential consolidation in the New Zealand print market.
• Dependence on a few large customers (60% of revenue from top 5).
• Maintaining software development quality control and well-trained staff.
• Cyber and data security risks.
• Operational risk of a single-site facility in New Zealand.
• Dependence on distribution channel partners for international markets.
• Macroeconomic headwinds and uncertainty.

Mitigation Strategies

• Digital first approach to help clients create more effective communications tailored by channel.
• Investing in sales and marketing in the US to increase market awareness.
• Integrating artificial intelligence (AI) into its customer communications platform for language translation.
• Regular review of IT and data security arrangements, including use of external consultants.
• Reciprocal disaster recovery plan with another printer and backup capability with a division of its major print equipment supplier.
• Aiming to ensure its software meets channel partner requirements.
• Prudent approach to balance sheet management to prepare for potential acquisition opportunities.

Supply Chain Management

Climate-Related Risks & Opportunities