Interim Results

RNS Number : 6834X

dotDigital Group plc

20 February 2012

 



dotDigital Group Plc

Interim Results for the six months ended 31 December 2011

dotDigital Group Plc ("dotDigital" or "the Group") announces interim results for the six months to 31 December 2011.

Highlights

·     Revenues increased by 33% (from £4.1m (2010) to £5.5m (2011))

·     Profit after tax increased by 57% (from £0.8m (2010) to £1.2m (2011))

·     Operating profit before exceptional increased by 23%

·     831 new clients in the period

·     An expansion of products & services

·     Earnings per share before exceptional up 27% to 0.38p (0.3p:2010)

·     Net cash generated from operations of £1.2m

Peter Simmonds, CEO, Commented:

"I am delighted to announce results for the first six months which show a 33% growth in revenues and a 23% growth in operating profit before exceptional items. This continued high growth in the current economic climate is the result of the hard work and commitment of our staff together with a clear focus on our growth strategy. We have continued to create new products and add innovations to our existing products which we believe will provide further revenue opportunities for the future. The companies admission to AIM in 2011 has been a success with a blue chip shareholder base established. The macro economic situation will undoubtedly present new challenges for 2012 but we look forward to the future with confidence in our people and our strategy. "

20 February 2012

Enquiries

dotDigital Group Plc Peter Simmonds, Chief Executive	Tel: [phone]
NOMAD and Co- Broker Zeus Capital Ross Andrews/Nick Cowles	Tel: [phone]
Co- Broker Charles Stanley Securities Dugald J.Carlean/ Luke Webster	Tel: [phone]

Business summary

Founded in 1999, dotDigital Group has grown to become a leader in the provision of intuitive software as a service products for digital marketing professionals.

In addition, the company helps its clients with their online marketing through a variety of services such as search engine optimisation, digital strategy advice, e-commerce and managed services.

Key statistics

·     Business sector- SaaS

·     Offices-London, Croydon, Manchester, Edinburgh, Northampton, Minsk

·     Over 170 employees

·     Profitable since 2000

·     2011/12 first half revenues £5.5m up 33%

Financial summary

We are pleased to announce continued strong profitable growth in the six months ending 31 December 2011. Revenues grew 33%; operating profit before tax and exceptional items grew 22% and profit after tax before exceptional items grew 37%.

The business has continued to be cash generative with net cash inflows from operations of £1.2m in the six months to December 2011 and the cash balance at the balance sheet date was £2.9m.

Exceptional item

Management has been focused on completing the integration of the business previously known as Netcallidus which was acquired in May 2010. The business has been rebranded as dotSearch, and all of the staff have now been fully integrated into the dotDigital Group. Work has been on going to harmonise operational processes and sales methodology across all of the teams involved in search marketing. In November 2011 the board announced the completion of the earn-out arrangements previously agreed with the vendors of Netcallidus.

This agreement resulted in a final payment of £170k, taking the total price paid for the acquisition to £1.3m

In June 2009, in accordance with IFRS3, the acquisition was accounted for based on actual consideration in May 2009 plus estimated future deferred consideration which was based on forecasts in the vendors information memorandum.

A review of expected deferred consideration was carried out in June 2010 resulting in a credit to finance income of £1.1m.

Finalisation of the earn out agreement, following the exit of the vendors in November 2010, has resulted in a further credit to finance income of £1.1m and an adjustment to goodwill of £0.9m in the period under review.

Whilst the adjustments appear in separate parts of the Income Statement, as required by IFRS, the net impact of the adjustment is broadly neutral for the period under review.

Review of operations

The results for the period under review continue to benefit from a growing market for digital marketing services despite the overall economic situation and from consistent implementation of the award winning growth strategy initiated in previous years.

Growth by sector

		Growth
		%
Email Marketing		40%
Managed Services		58%
Agency Services		-9%
Search Marketing		25%
Total Growth		33%

Email Marketing

Once again e-mail marketing was a very strong contributor to the overall growth of the business with recurring revenues continuing to grow strongly. Numbers of new clients for the e-mail marketing product dotMailer continued to rise with an increase of 831 new clients for the six months under review.

Managed Services

Provision of managed services to dotMailer clients also shows very strong growth in the period.  Further large corporate clients have become dotMailer customers and the provision of campaign management, analytics and consultancy has become a key part of the offering to these clients.

Agency Services

The decline in revenue from bespoke websites is as a result of previous decisions to concentrate resources on software as a service products and provision of services with strong recurring revenues. The strategic focus away from bespoke projects has been complimented by a change to the method of delivery of bespoke projects and despite a decline in revenue this area of the business is now contributing more to the overall profit of the group.

Search Marketing

Revenues from search marketing (search engine optimisation and pay per click management) grew by 25%.

Following significant changes to the algorithms used by the search engines during 2011, management has been very actively reviewing all of the tactical approaches used in the search engine optimisation process to ensure that the methodologies used are the most effective and successful for our clients. This review has resulted in some significant changes to staffing, use of expert content creators, and far wider collaboration with clients to build coherent social media strategies that will assist with search engine rankings. Management expects that following this review there will be further changes to the profile of clients that form the nucleus of the search marketing business.

New Products

The online survey product, dotSurvey, was launched in free beta in late 2011. Customer feedback has been very positive and around 1000 clients have become active users.

It is planned to start charging for useage in April 2012 with a promotional offer to all existing dotMailer clients.

The marketing plan for full scale launch will be based upon early customer reactions to our pricing and feature set.

The simple Saas version of the ecommerce application is planned to go to alpha testing in March/April 2012. Again this will be tested initially with dotMailer clients before developing a plan for broader marketing.

Investment in People

As part of the board's strategy to position the business for further sustained growth there has been a considerable investment in people during the second half of 2011 with a key focus on adding experience and depth to the senior management of the business.

The board has been strengthened with the appointment of Frank Beechinor-Collins as Chairman and Richard Kellett-Clarke as non-executive director.

As part of the strategic plan to position the business for sustained growth there has been considerable focus in the period on the strengthening of the senior operational management group.

The board had identified a number of key business areas where additional skills and experience would be an essential element of delivering on the growth strategy. New key hires have been made in the following areas:

Employee Engagement	HR Director, HR Manager
Systems Integration & Scaling	Senior Systems Architect, Head of Product Integration
Business Development	Director of Channel Development, Director of Marketing Communications
Business Operations	Head of Process Change, Director of Search Operations, Head of SEO Strategies

With ambitious growth plans for future the board believes that hiring the best people and providing a culture where all staff are engaged in the business is vital to the continued success, albeit this will have a short impact on cost/income ratios.

As part of the strategy to ensure the business has the talent and culture to maintain growth the board took the decision to enter the "Times 100 Best Companies To Work For" competition.

Although we were just outside the Top 100 this year we were delighted to receive a star rating and a good understanding of areas for improvement in coming years. As part of the maturing of the business, the board have committed to further investment in training, development and mentoring our people with the aim of attracting and retaining the best people.

Outlook

Demand continues to be strong for the products and services provided by the business despite the macro-economic outlook for the UK. Digital marketing continues to provide businesses of all sizes with an effective and measurable way to promote their products and services.

Our markets however remain competitive and continued product innovation and high levels of client service remain vital to attract and retain customers.

With a client base that includes many SMEs we are also seeing an increased propensity for smaller businesses to look to cut costs in the current climate thus increasing the need for proactive account management activities.

Overall the board remains confident in the future growth although we remain conscious that many customers are facing difficult times and low business confidence will continue to impact customers' purchasing decisions throughout 2012.

As part of our strategy to widen the sources of new business we have strengthened the product integration team, built a number of new integrations with CRM systems and created a channel sales team to promote these tools both within the UK and abroad. The board expect this activity to start making a contribution to sales during 2012.

Product development has continued at a pace during 2011 and we launched our new 'drag and drop' visual editor for dotMailer which has been enthusiastically received by both existing and new clients. The board expects this to contribute to improved sales conversions over the coming year.

The development of the online survey tool known as dotSurvey has resulted in a product with around one thousand Beta users and some very positive customer feedback has been received. It is planned to move this product from Beta to live in April 2012.

The development of the SaaS version of dotCommerce has made significant progress and it is expected that this will be made available for Alpha testing by April 2012.

dotDigital Plc
Consolidated Income Statement
For the six months ended 31 December 2011
					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Revenue				5,486		4,123		8,952
	Administrative expenses including exceptional				(5,146)		(3,088)		(6,647)
	Operating profit before exceptional items				1,271		1,035		2,305
	Exceptional item: Cost of listing on AIM				-		-		(120)
	Exceptional item: Impairment of goodwill due to
	Adjustment to deferred consideration				(931)		-		-
	Operating profit				340		1,035		2,185
	Finance income including exceptional			4	1,083		-		1,128
	Finance costs				(22)		(10)		(1)
	Profit before tax before exceptional items				1,253		1,025		2,185
	Exceptional item: Financial income adjustment for
	contingent consideration			4	1,079		-		1,123
	Profit before income tax				1,401		1,025		3,312
	Income tax charges				(193)		(254)		(274)
	Profit for the period from continuing
	operations attributable to shareholders				1,208		771		3,038
	Earnings per share:
	Basic (pence)			5	0.44		0.30		1.16
	Adjusted (pence) before exceptional			5	0.38		0.30		0.78
	Diluted (pence)			5	0.43		0.28		1.10

dotDigital Plc
Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2011
					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Profit for the period				1,208		771		3,038
	Other comprehensive income				-		-		-
	Total comprehensive income
	attributable to:
	Owners of the parent				1,208		771		3,038

dotDigital Plc
Consolidated Statement of Financial Position
For the six months ended 31 December 2011
					As at		As at		As at
					31 Dec 2011		31 Dec 2010		30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Assets
	Non current assets
	Goodwill				3,190		4,121		4,121
	Intangible assets				1,338		676		990
	Property, plant and equipment				295		182		238
					4,823		4,979		5,349
	Current assets
	Trade and other receivables				2,132		1,643		1,658
	Cash and cash equivalents				2,915		2,172		2,568
					5,047		3,815		4,226
	Total assets				9,870		8,794		9,575
	Equity attributable to  the
	owners of the parent
	Called up share capital				1,375		1,293		1,375
	Share premium				4,737		4,534		4,737
	Unissued share capital				-		152		-
	Reverse acquisition reserve				(4,695)		(4,695)		(4,695)
	Other reserves				85		67		70
	Retained earnings				6,942		3,467		5,734
	Total equity				8,444		4,818		7,221

dotDigital Plc
Consolidated Statement of Financial Position (continued)
For the six months ended 31 December 2011
					As at		As at		As at
					31 Dec 2011		31 Dec 2010		30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Liabilities
	Non current liabilities
	Trade and other payables
	Financial instruments
	Financial liabilities - borrowings and				-		2,366		1,243
	Interest bearing loans				-		6		-
					-		2,372		1,243
	Current liabilities
	Trade and other payables				1,137		1,041		1,008
	Financial liabilities - borrowings and
	Interest bearing loans				-		6		6
	Tax payable				289		557		97
					1,426		1,604		1,111
	Total Liabilities				1,426		3,976		2,354
	Total equity and liabilities				9,870		8,794		9,575

dotDigital Plc
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2011
				Share		Share		Retained			Other				Reverse			Unissued		Total
				capital		premium		earnings			reserves				acquisition			share
															reserve			capital
				£'000s		£'000s		£'000s			£'000s				£'000s			£'000s		£'000s
As at 1 July 2010				1,293		4,534		2,696			29				(4,695)			152		4,009
Profit after tax for the period				-		-		771			-				-			-		771
Share based payment				-		-		-			38				-			-		38
As at 31 December 2010				1,293		4,534		3,467			67				(4,695)			152		4,818
As at 1 July 2010				1,293		4,534		2,696			29				(4,695)			152		4,009
Profit after tax for the year								3,038												3,038
Issue of share capital				67		66		-			-				-			-		133
Reclassification of equity				15		137		-			-				-			(152)		-
Share based payment				-		-		-			41				-			-		41
As at 30 June 2011				1,375		4,737		5,734			70				(4,695)			-		7,221
																				0
As at 1 July 2011				1,375		4,737		5,734			70				(4,695)			-		7,221
Profit after tax for the period				-		-		1,208			-				-			-		1,208
Share based payment				-		-		-			15				-			-		15
As at 31 December 2011				1,375		4,737		6,942			85				(4,695)			-		8,444
- Share capital is the amount subscribed for shares at nominal value.
- Share premium represents the excess of the amount subscribed for share capital over the nominal value
net of the share issue expenses.
- Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
- Unissued Share capital relate to the shares due to be issued in relation to the acquisition of Netcallidus Limited.
- The reverse acquisition reserve relates to the adjustment required to account the reverse acquisition in
accordance with International Financial Reporting Standards.
- Other reserves relate to the charge for the share based payments in accordance with International
Financial Reporting Standard 2.
dotDigital Plc
Consolidated Statement of Cash Flow
For the six months ended 31 December 2011
									6 months				6 months				12 months
									to 31 Dec 2011				to 31 Dec 2010				to 30 June 2011
									Unaudited				Unaudited				Audited
							note		£'000s				£'000s				£'000s
	Cash flow from operating activities						6		1,174				1,164				2,463
	Cash generated from operations
	Interest paid								(22)				(10)				(2)
	Tax paid								-				-				(478)
	Net cash generated from operating activities								1,152				1,154				1,983
	Cash flow from investing activities
	Purchase of intangible fixed assets								(520)				(198)				(657)
	Purchase of tangible fixed assets								(120)				(56)				(161)
	Interest received								4				-				5
	Net cash used in investing activities								(636)				(254)				(813)
	Cash flows from financing activities
	Loan repayments in period								(170)				(6)				(12)
	Share issues								-				-				133
	Net cash (consumed)/generated from financing activities								(170)				(6)				121
	Increase in cash and cash equivalents								346				894				1,291
	Cash and cash equivalents at beginning of period								2,569				1,278				1,278
	Cash and cash equivalents at end of period.								2,915				2,172				2,569

dotDigital Group Plc

Notes to Interim Financial Information

For the six months ended 31 December 2011

1.     General information        

         dotDigital Group Plc is a company incorporated in England and Wales and quoted on the AIM market.                                                                                                            

2.     Basis of preparation                                                                                                                                              

These consolidated interim financial accounts have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and on a historical basis, using the accounting policies which are consistent with those set out in the Group's annual report and accounts          for the period ended 30 June 2011. The interim financial information for the six months to 31 December 2011, which complies with IAS 34 'Interim Financial Reporting' has been approved by the Board of Directors on 17 February 2012.                                                                       

The unaudited interim financial information for the period ended 31 December 2011 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures        for the year ended 30 June 2011 are extracted from the statutory financial statements which have been filed with the Registrar of Companies and contain an unqualified audit report and did not contain statements under Section 498 to 502 of the Companies Act 2006.                                      

3.     Significant accounting policies                                                                                                                         

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2011, as described in those financial statements.                                                            

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total earnings.                                                                                       

4.     Finance income                                                                                                                                                       

Finance income for the period includes the effect of the elimination of the financial instrument created in relation to the acquisition of Netcallidus Limited in 2010 as required by IFRS 3. The Directors of the Group have elected to apply this to the interim figures as a final settlement in regards to the consideration due to the previous owners of Netcallidus has been agreed and paid. The amount of the adjustment is £1,079,000.

5.       Earnings per share

					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
	Earnings per Ordinary share
	Basic (pence)				0.44		0.30		1.16
	Adjusted (pence)				0.38		0.30		0.78
	Diluted (pence)				0.43		0.28		1.10

The profit per Ordinary share is based on the Group's profit for the period of Basic: £1,208,000, Adjusted: £1,060,000 (31 December 2010 £771,000, 30 June 2011: Basic: £3,037,820, Adjusted: £2,034,854) Adjusted earnings represents earnings normalised for unique charges and income in the period:

					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
	Profit attributable to shareholders				1,208		771		3,038
	Cost relating to listing on AIM				-		-		120
	Impairment of goodwill				931		-		-
	Fair value adjustment to financial instruments				(1,079)		-		(1,123)
	Profit figure utilised for adjusted EPS				1,060		771		2,035
	Diluted weighted average number of shares in issue as follows:
					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
	Weighted average number
	Basic				274,972,065		258,500,000		261,891,138
	Adjusted				274,972,065		258,500,000		261,891,138
	Diluted				279,154,323		275,707,317		284,159,360

6.       Reconciliation of operating profit to net cash inflow from operating activities

					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Profit before income tax				1,401		1,025		3,312
	Adjustments for:
	Depreciation and amortisation				1,164		126		321
	Share options				15		38		41
	Finance costs				22		10		1
	Finance income				(1,083)		-		(1,128)
	Increase in receivables				(474)		(408)		(423)
	Increase in payables				129		373		339
	Net cash from operating activities				1,174		1,164		2,463

7.      Called up share capital

The issued share capital as at 31 December 2011 was 274,972,065, Ordinary Shares of 0.5p per share (30 June 2011 274,972,065 Ordinary Shares of 0.5p per share as per the audited accounts).

8.      Share based payments                                                                        

The measurement requirements of IFRS2 have been implemented in respect of the share options that were granted after 7 November 2002. The expense recognised for share based payment made during the period is £14,634, (31 Dec 2010: £38,074; 30 Jun 2011: 40,677).                

In addition to the options issued up to 30 June 2011, as outlined in the statutory financial statements, the Board of Directors also granted 8,192,000 options to employees of the Group exercisable on or after 1 October 2012 until 31 December 2015. Vesting conditions of the options dictate that the employee must remain part of the Group up to the date they choose to exercise their options to qualify.

9.      Segmental reporting                                                                            

The Group's primary reporting format is business segments and its secondary format is geographical segments. The Group only operates in a single business and geographic segment. The Group's single line of business is the provision of web based marketing services, whilst the geographical segment in which it operates is currently restricted to the UK. Accordingly, no segmental information for the business segment or geographical segment is required.

10.  Related party transactions

Transactions between the company and its subsidiaries, who are related parties, have been eliminated on consolidation and are not disclosed in this note.

             Key  management remuneration:

Key management includes, Directors, Associate Directors, Members of the Executive Committee and the Company Secretary. The remuneration paid for key management employee services are as follows:

					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Remuneration and other short term benefits				303		285		842
	Share based payments				5		2		8
					308		287		850
	Directors & Non-Executive Directors
					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Aggregate emoluments				263		282		779
	Aggregate gains made on exercise of share options				-		-		483
	Company contributions to pension scheme				18		14		34
					281		296		1,296

	The following transactions were carried out with related parties
	Purchase of services
					6 months		6 months		12 months
					to 31 Dec 2011		to 31 Dec 2010		to 30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Entities controlled by non-executive directors of the
	Group:
	F Beechinor Collins - Consultancy for International expansion & channel partner development
					30		-		-
	N Nelson:
	Haggie Financial LLP - Financial PR				-		5		5
	Nexus Financial LLP - Financial PR				-		8		21
	Hansard Communications Ltd - Financial PR				15		-		3
					45		13		29
	Year end balances from sale/purchases of services
					As at		As at		As at
					31 Dec 2011		31 Dec 2010		30 June 2011
					Unaudited		Unaudited		Audited
					£'000s		£'000s		£'000s
	Payables to related parties
	F Beechinor Collins - Consultancy for international
	expansion & channel partner development				10		-		-
	N Nelson:
	Haggie Financial LLP - Financial PR				-		-		-
	Nexus Financial LLP - Financial PR				-		3		-
	Hansard Communications Ltd - Financial PR				-		-		2
					10		3		2

11.       Events subsequent to 31 December 2011

As at the date of these statements and the date they were approved by the Board of Directors there were no such events to report.

12.       Copies of interim financial statements

Copies of this interim statement are available from the Company at its registered office at, Finsgate, 5-7 Cranwood Street, London EC1V 9EE. The interim financial information document will also be available on the Company's website www.dotdigitalgroup.com.

 

END

 

 

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