TIDMDOTD
RNS Number : 1163E
dotDigital Group plc
16 October 2018
dotdigital Group plc
("dotdigital" or the "Group")
Preliminary results
dotdigital Group plc (AIM: DOTD), a leading omnichannel
marketing automation platform, announces preliminary results for
the year ended 30 June 2018 with strong growth in revenue and
profit driven by the Group's organic growth strategy and the
addition of omni-channel functionality.
Highlights
-- Group revenues grew 35% to GBP43.1m (2017: GBP32.0m)
-- Adjusted EBITDA(1) grew 21% to GBP12.5m (2017: GBP10.3m)
-- Adjusted operating profit(2) grew 22% to GBP10.0m (2017: GBP8.2m)
-- Strong cash balance at period end of GBP15.0m (2017: GBP20.4m)
o Includes the acquisition and funding of Comapi for GBP11.5m
(GBP10.7m acquisition cost)
-- Comapi omni-channel acquisition fully integrated and performing in line with expectations
-- ARPU(3) grew 18%, increasing from GBP715 per month to GBP845 per month
-- Customers signed in the period increased 26% to 689 (2017: 548)
-- Strong momentum in Q4 from contracted monthly recurring revenues
Product innovation
-- Recurring revenue increased 41% driven by enhanced product functionality
-- Comapi omni-channel functionality integrated into Dotmailer
-- Three substantial product releases, with focus on automation and personalisation
-- Accelerated investment in AI and machine learning
Strategic partnerships
-- Magento partnership shows strong growth with ARPU increasing 7% to GBP1,512 per month
-- Expanding relationships with Shopify, BigCommerce and Shopware enhancing ecommerce
-- Microsoft Dynamics integration delivers 42% ARPU growth to GBP1,405 per month
"Magento's policy is to work with best in class on-point
solutions - of which our premier partners are shining examples of
this. Our customers are, and will always be, free to use whatever
add-on technology they determine best matches their requirement."
Mark Lavelle, CEO of Magento Commerce
Geographic expansion
-- EMEA revenue grew 11% (excluding Comapi) to GBP27.3m (2017:
GBP30.4m) despite impact of GDPR. Sales cycles normalised post GDPR
implementation (25 May 2018)
-- USA revenue grew 43% (excluding Comapi) to $7.1m (2017:
$5.0m) following a strong focus on strengthening the Group's
channel management team
-- APAC revenue growth of 85% (excluding Comapi) to AUS$2.1m
(2017: AUS$1.2m) due to relationships with channel partners and
increased direct sales client conversion rates
Milan Patel, CEO of dotdigital, commented:
"We have continued to deliver on our three strategic pillars,
expanding our geographic footprint and increasing our addressable
market through integrations built into our strategic
partnerships.
The addition of Comapi expands our functionality significantly
through the addition of omni-channel, driving innovation in a
dynamic business environment impacted in 2018 by significant
regulatory change.
With continued investment in our platform and people, we are in
a strong position to identify and deliver upon further
opportunities for long term growth.
The transition towards becoming an AI-driven, omni channel
platform continues to gather pace, better placing dotdigital to
capitalise on the opportunity of a global market for marketing
automation technology and customer engagement.
We remain focussed on delivering against our strategy and are
confident for the year ahead."
For more information, please contact:
dotdigital Group Plc Tel: 020 3953 4445
Milan Patel, CEO
Paraag Amin, CFO
FTI Consulting (Financial PR and Investor Tel: 020 3727 1000
Relations)
Matt Dixon
Adam Davidson
N+1 Singer (Nominated Adviser and Joint Tel: 020 7496 3000
Broker)
Shaun Dobson, Head of Corporate Finance
Rachel Hayes, Corporate Broking
Alex Bond, Corporate Finance
finnCap (Joint Broker) Tel: 020 7220 0500
Stuart Andrews, Corporate Finance
Rhys Williams, Sales
Camille Gochez, Equity Capital Markets
Alice Lane, Equity Capital Markets
Prior to this announcement's release, the statement contained
inside information for the purposes of Article 7 of Regulation (EU)
596/2014 (MAR) (Market Abuse Regulation).
1. EBITDA is earnings before interest, tax, depreciation and
amortisation and adjusted for acquisition costs and share-based
payments
2. Operating profit is adjusted for acquisition costs and share-based payments
3. ARPU means Average Revenue Per User
Operational Review
Total revenue in the year grew by 35% to GBP43.1m, of which
organic revenue growth was 15% and the remainder as a result of the
Comapi acquisition, which contributed GBP6.2m for a period of seven
and a half months, from mid-November 2017. We saw double-digit
growth in the EMEA region (excluding Comapi) of 11%, from GBP27.3m
to GBP30.4m, despite regulatory change in the European market. This
growth was also helped through a combination of higher value new
client wins, an increase in the number of new customers (we saw a
26% increase in new customers signed up), our ability to
continually monetise advanced features alongside the additional
marketing channels adopted by existing clients. This is evident by
revenues from enhanced functionality and licence fees monthly
recurring charges now achieving GBP8.9m, which is an increase of
41%.
We have seen substantial progress in the international markets,
with revenues outside of the core UK market (excluding the Comapi
acquisition) growing by 33% and now represent 26% of the Group's
revenues. International expansion remains a core pillar in our
organic growth strategy. The Group has added notable clients across
its market both locally and internationally.
In addition, we have continued to see strong growth from a
professional service offering (excluding Comapi) which is adding
value to our customers, with the revenues growing 24% to
GBP4.1m.
During the year, dotmailer's average revenue per user rose by
18% from GBP715 per month to GBP845 per month. This was the result
of continued focus on mid-market, enterprise clients and customers
that use the Magento integration spending on average over GBP1,500
per month. dotmailer saw an increase of 26% in new customers
signing up which represents circa. 680 clients. Overall volume of
messages sent out by dotmailer increased by 21% to 14.4bn from
11.9bn, reflecting the change in demographic but also increasing
the recurring revenue growth and adding to the increasing ARPU. The
other area adding to the expansion is the new channels that are
being sold following the integration of Comapi.
We saw double-digit growth from the UK market, which was
slightly impacted by regulation change. GDPR caused slight delays
in monthly message revenue coming through following sign-up to the
Dotmailer platform, whilst customers got ready for their own
compliance in the necessary departments that needed to get involved
to validate the technology chosen (typically legal and IT). As we
went past the implementation date in May, we have seen sales cycles
normalising. In the year, we have also refocused on a customer
success strategy that is even more attentive and value focused.
This has resulted in improved customer satisfaction and
retention.
Market
The marketing automation market is set to expand from GBP8.8bn
in 2017 to GBP19.3bn by 2023, which shows a global compound annual
growth rate (CAGR) of approximately 14%, according to Forrester
Research. Currently email marketing automation represents 30% of
the global market, closely followed by other channels such as
mobile application marketing and social media marketing. According
to the research, email marketing is anticipated to govern the
marketing automation market. This is due to the increased adoptions
of digitalisation and the channel's status as a relatively low cost
but effective marketing method.
The retail segment is anticipated to lead the marketing
automation space, and this supports dotdigital's strategy to
continue integrating with e-commerce platforms in order to increase
the addressable market in this space.
North America, Europe and Asia will lead, with the fastest
growth across those markets. The Group currently has three separate
hubs that mirror these markets, with a user interface translated
into multiple languages and a scalable infrastructure that has
in-region data processing and storage to mirror these growth areas.
The Group is therefore well placed to capture market share in those
areas.
Geographic Progress
North America
Revenue in our North American region accelerated. It grew by 43%
to $7.1m following the successful changes and investment through
the period. Changes that were made in the period were to strengthen
the channel management team and increase the number of people
within the region to support our customers. The e-commerce
connectors that have been built and enhanced in the year has also
helped expand the addressable market in the region. We continue to
invest in the region with the opening of the West Coast office that
will allow closer client and partner interaction in the region and
continue to build a strong pipeline in the market.
APAC
Growth from the APAC region of 85% (excluding Comapi) saw
revenues increasing from AUS$1.2m to AUS$2.1m, partly due to the
continuous relationships with the channel partners and the increase
in conversion of prospects to clients by our direct sales team. For
the best customer experience in APAC, we continue to invest in our
support, customer success and the sales teams. Strong relationships
are building in Far East Asia to help raise brand awareness and
thought leadership. Early signs are good with the introduction of
our omni-channel strategy, with Asia being heavily focused on
mobile marketing.
EMEA
EMEA saw revenue growth of 11% (excluding Comapi) from GBP27.3m
to GBP30.4m. We still see strong double-digit growth from the
region. EMEA revenue were slightly impacted in the first half of
the financial year by delays, in customer spending, ahead of GDPR
implementation. As anticipated, the region's sales cycles have
normalised post GDPR. The region saw an increase in the number of
customers signed up following the changes made in the training and
development programme for the sales and customer success teams.
The continued focus on the Nordics and Benelux region has
resulted in stronger partnerships and growing revenue stream in the
region. With the early success in the market, we continue to add to
the dedicated channel managers and sales teams that sell into the
EMEA market as the pipeline builds. We have started to test the
German market with employees in-region as our partnership with
Shopware strengthens. Shopware is the largest e-commerce platform
in Germany for mid-market clients. We continue to develop stronger
partnerships with system integrators and raise brand awareness in
that market.
During the period, we withdrew the self-service offering from
the South African market and some of the early learnings we took
from the test was that the platform was well placed to serve the
needs of mid-market and enterprise clients which will only transact
with us through the direct sales team in the EMEA region.
Product innovation
We continue to invest in research and development of our
technology, aiming to be the world's best data-driven marketing and
customer engagement platform. In the year we've continued to scale
the platform across all regions. The acquisition of Comapi that was
completed in November 2017 has accelerated the platform development
with new omni-channel features being integrated into the platform
for upsell opportunities to existing customers and attracting more
marketeers that are sophisticated in the digital marketing
strategies. The move into omni-channel, although early days, has
proved to be successful and puts us in a unique position against
our competitors.
There were many enhancements made to connectors with the
introduction of a Salesforce Commerce Cloud and Shopware solutions.
With the premium integrations that we have built into e-commerce
platforms, this now allows us to address at least 50% of midmarket
e-commerce merchants globally.
As part of a continued commitment to accelerating functionality
progress, we continue to add globally to our development teams.
These teams will allow us to continue innovating our technology
which will give us a stronger competitive advantage. Next year will
also see an acceleration in development within the artificial
intelligence and machine learning space. We have released
significant features that take us into this space. The data science
team has also been added to our product development teams. The
recurring revenues from our enhanced functionality increased by 41%
(excluding Comapi) compared to the previous year and now represent
GBP8.9m of the Group's revenues.
Strategic partnerships
Magento: We continue to enhance the connector to make it easy
for our customers to attribute better ROI from their digital
marketing campaigns from the value proposition we provide. We have
continued to deepen our relationship with the release of Magento
bundling in November 2017, where the platform ships with the core
codebase to their customers using Magento version 2.2 or newer.
Magento was recently acquired by Adobe and, after speaking to their
senior executives, we are pleased to report that it is business as
usual with our partnership. The connector is now used by over 670
clients and generating annualised recurring revenues of more than
GBP9.2m. We continue to see strong pipelines building and good
level of take-up from the Magento customer base. The average
revenue per month from Magento customers increased by 7% to
GBP1,512 per month.
Shopify: The Shopify connector now serves over 40 clients. We
continue to add new functionality that helps the retailer build out
their digital marketing strategies. Average monthly recurring
revenues from these clients is GBP1,032 per month. The pipeline and
partnership continue to build, and we feel optimistic in growth
from this partnership in the next financial year.
Big Commerce: It is still early days with the Big Commerce
connector which we continue to enhance. dotmailer has been named as
the first European-based Elite partner which will help in endorsing
our connector. Both companies continue to work on the go to market
strategies and promotion of the dotmailer platform to their
e-commerce merchants.
Other e-commerce connectors: We have continued to develop
relationships with the likes of Shopware and Salesforce Commerce
cloud including adding new e-commerce integration partners
globally. We will maintain this development as we move into the
next financial year.
As part of our commitment to our B2B marketing customers, we
added new functionality and continue to build our relationships
with Microsoft for our integration into Microsoft Dynamics CRM and
Salesforce. These connectors are now used by over 503 clients and
generate annualised recurring revenues of more than GBP6m. As there
is more value being put in data by our customers for
personalisation and targeting we see a good upsell opportunity and
attracting more integrated clients. We have seen our significant
growth in ARPUs from the Dynamics connector clients increasing 42%
to GBP1,405 per month.
People
We have continued to strengthen and develop the senior
management team that look after the day-to-day running of the
business, both by adding new members to the leadership team, and
promoting from within through our learning and development
programme. This has strengthened the foundations in place - from a
management bandwidth and skills perspective.
We invested in sales, customer success, marketing and product
development in the year to continue supporting our product
innovation goals, but also allow us to further develop global brand
awareness. With the continued success of international markets, we
added another 41 people to allow us to provide our customers with a
scalable business model and to support overall business growth. We
believe our people are crucially important to our business and its
future; further investment will be made in the training and
development of all our employees.
The Group also welcomed Paraag Amin as Chief Financial Officer
in February 2018, and to help support Milan in day-to-day
responsibilities. Paraag brings a wealth of experience in financial
and operational analysis and comes with broad experience in the
industry and public markets. He also has experience across several
departments through the business he founded.
Acquisitions
In the year, we completed the acquisition of Comapi, which was a
business focused on omni-channel messaging and cloud communications
market for a cash consideration of GBP10.7m (which includes the
payment of loans in Comapi), with a potential consideration of
GBP1.2m in share options for the management team dependent on them
achieving specific performance targets over a two-year post
acquisition and remaining with the business. The acquisition
will:
-- Extend dotdigital's marketing automation platform to provide
an industry-leading solution offering fully integrated omni-channel
and conversational commerce support to marketers,
-- Enable dotdigital to deliver aligned conversational messaging
across channels including email, mobile push, SMS, Facebook
messenger, Apple business messenger, Twitter and live chat
-- Enable dotdigital customers to meet consumer demand for a
more personalised communication experience and
-- Position dotdigital as the most advanced platform on the
market and make dotdigital more relevant in the strategic
mobile-first Asian market.
We continue to investigate opportunities beyond organic growth.
We do have very strict value-enhancing criteria to finding
strategic acquisitions. The areas in which we would consider making
an acquisition are:
1) Companies that can help us expand into new geographic markets
or allow us to grow faster in a market that we currently operate
within;
2) Companies that can allow us to build on our multi-channel
capabilities, beginning initially in the mobile and social
marketing space; and
3) Companies that can bring new functionality (e.g. artificial
intelligence) that will add value to our customer base within the
mid- and small enterprise market.
Financial review
Revenues
The Group achieved revenue growth of 35% (15% excluding Comapi;
2017: 19%), which delivered record overall revenues of GBP43.1m.
The quality of the revenue growth is evidenced by stable recurring
revenues of 85%. The Group continued to grow internationally with
revenues accounting for 22% of the Group's total (26% excluding
Comapi). Comapi contributed GBP6.2m of revenue in the seven and
half months that it has been part of the Group.
Business model
The Group generates the majority of its revenues from annual
message plans which are recognised equally over the life of the
contract. In addition, we sell upgrade packages to customers
allowing them to use additional modules and features of our
platform. For more sophisticated customers we offer customised
functionality and integrations so that they can maximise the use of
their customer data. These professional services contracts are
recognised as revenue as the work is performed.
Gross margins
The gross margin for the period was 79%, impacted by the
consolidation of Comapi (87% excluding Comapi; 2017: 86%). We
continue to see value in both the direct and indirect models of
selling in our international regions, and hence continue to invest
in building long-term annuity revenues.
Operating expenses
Adjusted EBITDA grew by 22% from GBP10.3m to GBP12.5m. Part of
this growth was due to the improvement in margins from moving the
infrastructure into the cloud last year and hence seeing the full
benefit this year. Investments that have been made in previous
years in product development and sales and marketing are also
paying off.
Operating expenses as a percentage of revenues dropped from 61%
to 56%, reflecting the growth in revenue. dotdigital continues to
invest in people in the areas of development, sales and marketing,
particularly within the regional offices, to continue enhancing and
adding to the product suite.
Balance sheet
There was strong cash management in the year with cash generated
from operations of GBP13.1m (2017: GBP8.8m). The cash at the end of
the period was standing at GBP15.0m (2017: GBP20.4m), despite the
acquisition of Comapi for a cash consideration of GBP10.7m. The
Group continues to be debt free and maintains a healthy balance
sheet. A combination of a highly efficient cash collection process
and an incentivisation push to move more customers onto Direct
Debit and automated credit card collection helped with the year-end
position.
Trade receivables have only grown by 12% (excluding Comapi) in
the year reflecting revenue growth and good cash management.
Overall receivables have grown 40% (excluding Comapi) as a result
of a large increase in prepayments due to the move to the hybrid
cloud infrastructure and deferred commission.
The Group continues to invest heavily in the software platform
to increase functionality around marketing automation, and in
building connectors to e-commerce and CRM platforms to allow our
customers to make the most of their data and provide excellent
customer engagement. This continued investment is demonstrated by
the increase in product development of GBP2.1m.
Goodwill
GBP9.1m of Goodwill reflects the acquisition of Comapi in the
year, for a cash consideration of GBP10.7m. Identifiable intangible
assets included GBP1.2m of technology and GBP1.2m of customer
relationships which will be amortised over 10 and 9 years
respectively.
Tax
The Group continues to grow its profitability; however this is
not reflected within the tax charge, which is now GBP0.7m with an
effective tax rate of 2.8%, the reason being enhanced R&D tax
credits and favourable movement in share-based payments.
EPS
In the year the adjusted basic EPS increased by 28% to 3.16p
(2017: 2.47p) and adjusted diluted EPS has increased to 3.12p
(2017: 2.46p). The increase in adjusted EPS is driven by the
increased profitability and the reduction in the effective tax rate
to 2.8% from 10.5%.
Dividend policy
As announced last year, the Board conducted its review of its
organic business plan for the following three years. This included
evaluating the cash needs required for opportunities in organic
growth to increase shareholder value and capital expenditure. The
Board decided that it will continue to keep a progressive dividend
in line with EBITDA growth. Therefore, subject to approval at the
AGM in December 2018, the Board proposes that the Group will pay a
final dividend of 0.64 pence per ordinary share (2017: 0.55p); to
be payable at the end of January 2019.
Outlook
The first few months of the new financial year have started very
well and in line with our plan. There has been an increase in the
customer numbers across all regions compared to the previous year.
As we look ahead we continue to invest in both our people and the
product, to further strengthen our position as an innovator as the
platform continues to evolve to be a data-driven, omni-channel
marketing automation platform with artificial intelligence and
machine learning, which empowers our customers to get a return on
investment from their digital marketing. The market continues its
very strong growth which puts us in an advantageous position to
capitalise on our organic growth strategy.
The Group has a strong position in changing markets and the
Board remains confident about the future growth prospects, assuming
that there is no adverse change in market conditions and delivery
against the planned strategy.
Milan Patel Paraag Amin
Chief Executive Officer Chief Financial Officer
15 October 2018 15 October 2018
DOTDIGITAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 JUNE 2018
30.6.18 30.6.17
GBP'000 GBP'000
Notes
CONTINUING OPERATIONS
Revenue 43,094 31,966
Cost of sales 7 (9,074) (4,459)
--------- ---------
Gross profit 34,020 27,507
Administrative expenses 7 (23,979) (19,269)
Share based payments (450) (162)
Exceptional costs 5 (357) -
--------- ---------
OPERATING PROFIT 9,234 8,076
Finance income 6 9 15
--------- ---------
PROFIT BEFORE INCOME TAX 7 9,243 8,091
Income tax expense 8 (685) (945)
--------- ---------
Profit for the year from continuing operations 8,558 7,146
========= =========
Profit for the year attributable to the owners of the parent 8,558 7,146
========= =========
Earnings per share from continuing operations (pence per share)
Basic 11 2.89 2.42
Diluted 11 2.85 2.41
Adjusted Basic 11 3.16 2.47
Adjusted Diluted 11 3.12 2.46
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2018
30.6.18 30.6.17
GBP'000 GBP'000
Notes
PROFIT FOR THE YEAR 8,558 7,146
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations 20 (54)
-------- --------
Total comprehensive income attributable to:
Owners of the parent 8,578 7,092
======== ========
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Comprehensive income from continuing operations 8,578 7,092
======== ========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2018
30.6.18 30.6.17
GBP'000 GBP'000
Notes
ASSETS
NON-CURRENT ASSETS
Goodwill 12 9,680 609
Intangible assets 13 9,787 4,519
Property, plant and equipment 14 1,046 1,033
-------- --------
20,513 6,161
-------- --------
CURRENT ASSETS
Trade and other receivables 16 12,953 7,847
Cash and cash equivalents 17 15,005 20,428
-------- --------
27,958 28,275
-------- --------
TOTAL ASSETS 48,471 34,436
======== ========
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital 18 1,490 1,481
Share premium 19 6,791 6,290
Reverse acquisition reserve 19 (4,695) (4,695)
Other reserves 19 661 305
Retranslation reserve 19 (26) (46)
Retained earnings 19 32,331 25,306
-------- --------
TOTAL EQUITY 36,552 28,641
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax 23 1,697 814
-------- --------
CURRENT LIABILITIES
Trade and other payables 20 10,217 4,440
Financial liabilities - borrowings:
* Interest bearing loans 5 -
Current tax payable - 541
-------- --------
10,222 4,981
-------- --------
TOTAL LIABILITIES 11,919 5,795
-------- --------
TOTAL EQUITY & LIABILITIES 48,471 34,436
======== ========
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF FINANCIAL POSITION
30 JUNE 2018
30.6.18 30.6.17
GBP'000 GBP'000
Notes
ASSETS
NON-CURRENT ASSETS
Investments 14 14,924 5,187
-------- --------
5
14,924 5,187
-------- --------
CURRENT ASSETS
Trade and other receivables 16 1,105 4,633
Cash and cash equivalents 17 646 591
-------- --------
1,751 5,224
-------- --------
TOTAL ASSETS 16,675 10,411
======== ========
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital 18 1,490 1,481
Share premium 19 6,791 6,290
Other reserves 19 661 305
Retained earnings 19 5,761 2,239
-------- --------
TOTAL EQUITY 14,703 10,315
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 20 1,972 96
TOTAL LIABILITIES 1,972 96
-------- --------
TOTAL EQUITY & LIABILITIES 16,675 10,411
======== ========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2018
Called
up share Retained Share
capital earnings premium
GBP'000 GBP'000 GBP'000
Balance as at 1 July 2016 1,473 20,611 6,138
Issue of share capital 8 - 152
Dividends - (2,479) -
Transfer in reserves - 28 -
Share-based payment - - -
---------- ----------- --------
Transactions with owners 8 (2,451) 152
---------- ----------- --------
Profit for the year - 7,146 -
Other comprehensive income - - -
Total comprehensive income - 7,146 -
---------- ----------- --------
Balance as at 30 June 2017 1,481 25,306 6,290
Issue of share capital 9 - 501
Dividends - (1,627) -
Transfer in reserves - 94 -
Share-based payment - - -
---------- ----------- --------
Transactions with owners 9 (1,533) 501
---------- ----------- --------
Profit for the year - 8,558 -
Other comprehensive income - - -
---------- ----------- --------
Total comprehensive income - 8,558 -
---------- ----------- --------
Balance as at 30 June 2018 1,490 32,331 6,791
========== =========== ========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2018
CONTINUED...
Reverse Total
Retranslation acquisition Other equity
reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 July 2016 8 (4,695) 174 23,709
Issue of share capital - - (3) 157
Dividends - - - (2,479)
Transfer in reserves - - (28) -
Share-based payments - - 162 162
Transactions with owners - - 131 (2,160)
-------------- ------------- --------- --------
Profit for the year - - - 7,146
Other comprehensive income (54) - - (54)
-------------- ------------- --------- --------
Total comprehensive income (54) - - 7,092
-------------- ------------- --------- --------
Balance as at 30 June 2017 (46) (4,695) 305 28,641
Issue of share capital - - - 510
Dividends - - - (1,627)
Transfer in reserves - - (94) -
Share-based payments - - 450 450
Transactions with owners - - 356 (667)
-------------- ------------- --------- --------
Profit for the year - - - 8,558
Other comprehensive income 20 - - 20
-------------- ------------- --------- --------
Total comprehensive income 20 - - 8,578
-------------- ------------- --------- --------
Balance as at 30 June 2018 (26) (4,695) 661 36,552
============== ============= ========= ========
-- Share capital is the amount subscribed for shares at nominal value.
-- Retained earnings represents the cumulative earnings of the
Group attributable to equity shareholders.
-- Share premium represents the excess of the amount subscribed
for share capital over the nominal value net of the share issue
expenses.
-- Retranslation reserve relates to the retranslation of foreign
subsidiaries into the functional currency of the Group.
-- The reverse acquisition reserve relates to the adjustment
required to account for the reverse acquisition in accordance with
International Financial Reporting Standards.
-- Other reserves relate to the charge for the share-based
payment in accordance with International Financial Reporting
Standard 2 and shares repurchased in the year classified as
treasury shares.
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2018
Called
up share Retained Share Other
capital earnings premium Reserves Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 July
2016 1,473 5,080 6,138 174 12,865
Issue of share capital 8 - 152 (3) 157
Dividends - (2,479) - - (2,479)
Transfer in reserves - 28 - (28) -
Share-based payments - - - 162 162
---------- ----------- -------- ------------ -------------
Transactions with
owners 8 (2,451) 152 131 (2,160)
---------- ----------- -------- ------------ -------------
Profit for the year - (390) - - (390)
Total comprehensive
income - (390) - - (390)
---------- ----------- -------- ------------ -------------
Balance as at 30
June 2017 1,481 2,239 6,290 305 10,315
Issue of share capital 9 - 501 - 510
Dividends - (1,627) - - (1,627)
Transfer in reserves - 94 - (94) -
Share-based payments - - - 450 450
---------- ----------- -------- ------------ -------------
Transactions with
owners 9 (1,533) 501 356 (667)
---------- ----------- -------- ------------ -------------
Profit for the year - 5,055 - - 5,055
Total comprehensive
income - 5,055 - - 5,055
---------- ----------- -------- ------------ -------------
Balance as at 30
June 2018 1,490 5,761 6,791 661 14,703
========== =========== ======== ============ =============
-- Share capital is the amount subscribed for shares at nominal value.
-- Retained earnings represents the cumulative earnings of the
Company attributable to equity shareholders.
-- Share premium represents the excess of the amount subscribed
for share capital over the nominal value net of the share issue
expenses.
-- Other reserves relate to the charge for the share-based
payment in accordance with International Financial Reporting
Standard 2 and shares repurchased in the year classified as
treasury shares.
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2018
30.6.18 30.6.17
GBP'000 GBP'000
Notes
Cash flows from operating activities
Cash generated from operations 28 13,129 8,813
Tax paid (501) (685)
--------- --------
Net cash generated from operating activities 12,628 8,128
--------- --------
Cash flows from investing activities
Purchase of subsidiary, net of cash acquired* (9,578) -
Purchase of intangible fixed assets (6,876) (2,379)
Purchase of tangible fixed assets (475) (375)
Sale of tangible fixed assets - 48
Interest received 9 15
--------- --------
Net cash flows used in investing activities (16,920) (2,691)
--------- --------
Cash flows from financing activities
Equity dividends paid (1,627) (2,479)
Loan repayments (14) -
Share issue 510 157
Net cash flows from financing activities (1,131) (2,322)
--------- --------
(Decrease)/Increase in cash and cash equivalents (5,423) 3,115
Cash and cash equivalents at beginning of year 29 20,428 17,313
--------- --------
Cash and cash equivalents at end of year 29 15,005 20,428
========= ========
*Cash acquired GBP157,884, please refer to Note 12.
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2018
30.6.18 30.6.17
GBP'000 GBP'000
Notes
Cash flows from operating activities
Cash generated from operations 28 10,909 2,274
-------- --------
10,909 2,274
-------- --------
Net cash generated from operating activities
Cash from investing activities
Purchase of investments (9,737) -
-------- --------
Net cash flows from investing activities (9,737) -
-------- --------
Cash flows from financing activates
Equity dividends paid (1,627) (2,479)
Share issue 510 157
Net cash flows from financing activities (1,117) (2,322)
-------- --------
Increase in cash and cash equivalents 55 (48)
Cash and cash equivalents at beginning of year 29 591 639
-------- --------
Cash and cash equivalents at end of year 29 646 591
======== ========
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2018
1. GENERAL INFORMATION
dotdigital Group Plc ("dotdigital") is a company incorporated in
England and Wales and quoted on the AIM Market. The address of the
registered office is disclosed on the inside back cover of the
financial statements. The principal activity of the Group is
described on page 34.
2. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and those parts of
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical
cost convention.
The Group has applied all accounting standards and
interpretations issued by the International Accountancy Standards
Board and International Accounting Interpretations Committee
effective at the time of preparing the financial statements.
New and amended standards adopted by the Company
There are no IFRSs or IFRIC interpretations that are effective
for the first time in the financial year beginning on or after 1
July 2017 that would be expected to have a material impact on the
Company.
Standards, interpretations and amendments to published standards
that are not yet effective
The following new standards, amendments to standards and
interpretations have been issued, but are not effective for the
financial year beginning 1 July 2017 and have not been early
adopted.
Reference Title Summary Application date of Application date of
standard Group
--------------------- ----------------------- ---------------------- --------------------- -----------------------
IFRS 2 Share Based Payments Amendments to clarify Periods beginning on 1 July 2018
the classification or after 1 January
and measurement of 2018
share based
transactions
--------------------- ----------------------- ---------------------- --------------------- -----------------------
IFRS 3 Business Combinations Amendments resulting Periods beginning on 1 July 2019
from the annual or after 1 January
review cycle. 2019
--------------------- ----------------------- ---------------------- --------------------- -----------------------
IFRS 4 Insurance Contracts Amendments regarding Periods beginning on 1 July 2018
the interaction of or after 1 January
IFRS 4 and IFRS9 2018
--------------------- ----------------------- ---------------------- --------------------- -----------------------
IFRS 9 Financial Instruments Amendments regarding Periods beginning on 1 July 2018
the interaction of or after 1 January
IFRS 4 and IFRS9 2018
IFRS 9 Financial Instruments Amendments regarding Periods beginning on 1 July 2019
prepayment features or after 1 January
with negative 2019
compensation and
modifications of
financial
liabilities
IFRS 11 Joint Arrangements Amendments resulting Periods beginning on 1 July 2019
from the annual or after 1 January
review cycle. 2019
IFRS 15 Revenue from Contracts Original issue Periods beginning on 1 July 2018
with Customers or after 1 January
2018
--------------------- ----------------------- -------------------- ----------------------- -----------------------
Amendments to defer Periods beginning on 1 July 2018
the effective date or after 1 January
2018
--------------------- ----------------------- -------------------- ----------------------- -----------------------
Clarifications to Periods beginning on 1 July 2018
IFRS or after 1 January
2018
--------------------- ----------------------- -------------------- ----------------------- -----------------------
IAS 40 Investment Property Amendments to Periods beginning on 1 July 2018
clarify transfers or after 1 January
or property to, or 2018
from, investment
property.
--------------------- ----------------------- -------------------- ----------------------- -----------------------
IFRS 1, IFRS 2, IAS 28 Annual improvements Amendments Annual periods 1 July 2018
2014-2016 Cycle resulting beginning on and after
1 January 2018
----------------------- --------------------- -------------------- ----------------------- -----------------------
IFRS 16 Leases Original issue Annual periods 1 July 2019
beginning on or after
1 January 2019
----------------------- --------------------- -------------------- ----------------------- -----------------------
Amendments to IFRIC 22 Foreign Currency Amendments to Annual periods 1 July 2019
transactions and clarify the beginning on or after
advance accounting for 1 January 2019
consideration transactions that
include the receipt
or payment
of advance
consideration in a
foreign currency.
----------------------- --------------------- -------------------- ----------------------- -----------------------
IFRIC 23 Uncertainty over Address how to Annual periods 1 July 2019
income tax treatment reflect uncertainty beginning on or after
in accounting for 1 January 2019
income tax
----------------------- --------------------- -------------------- ----------------------- -----------------------
The Directors anticipate that the adoption of these Standards
and the Interpretations in future periods will have no material
impact on the financial statements of the Group. The Group does not
intend to apply any of these pronouncements early. In regard to
IFRS 15, the Board has initiated a project to assess the likely
impact ahead of its implementation and expects this to have an
immaterial impact on the financial statements for the year ended 30
June 2018 of circa GBP500k on revenue.
The financial statements are presented in sterling (GBP),
rounded to the nearest thousand pound.
Basis of consolidation
In the period ended 2009 the Company acquired via a share for
share exchange the entire issued share capital of dotmailer
Limited, whose principal activity is that of providing SaaS via a
leading omni-channel marketing automation platform and managed
services to digital marketing professionals.
Under IFRS 3 'Business combinations' the dotmailer Limited share
exchange has been accounted for as a reverse acquisition. Although
these consolidated financial statements have been issued in the
name of the legal parent, the Company it represents in substance is
a continuation of the financial information of the legal
subsidiary, dotmailer Limited. The following accounting treatment
has been applied in respect of the reverse acquisition:
- The assets and liabilities of the legal subsidiary, dotmailer
Limited, are recognised and measured in the consolidated financial
statements at their pre-combination carrying amounts, without
restatement to their fair value;
- The retained reserves recognised in the consolidated financial
statements for the beginning of the prior period reflect the
retained reserves of dotmailer Limited to 30 April 2008. However,
in accordance with IFRS3 'Business combinations', the equity
structure appearing in the consolidated financial statements
reflects the equity structure of the legal parent dotdigital Group
Plc, including the equity instruments issued under the share
exchange to effect the business combination;
- A reverse acquisition reserve has been created to enable the
presentation of a consolidated balance sheet which combines the
equity structure of the legal parent with the non-statutory
reserves of the legal subsidiary;
- Comparative numbers are prepared on the same basis.
The following accounting treatment has been applied in respect
of the acquisition of dotdigital Group Plc:
- The assets and liabilities of dotdigital Group Plc are
recognised and measured in the consolidated financial statements at
their fair value at the date of acquisition.
- The cost of an acquisition is measured as the fair value of
the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and
liabilities assumed in a business combination are measured
initially at their fair values at the date of acquisition,
irrespective of the extent of any minority interest. The excess of
the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill. If
the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised
directly in the income statement.
Subsidiaries
A subsidiary is an entity whose operating and financing policies
are controlled by the Group. Subsidiaries are consolidated from the
date on which control was transferred to the Group. Subsidiaries
cease to be consolidated from
the date the Group no longer has control. Intercompany
transactions, balances and unrealised gains on transactions between
Group companies have been eliminated on consolidation.
The Group applies the acquisition method to account for business
combinations. In the statement of financial position, the
acquiree's identifiable assets and liabilities are initially
recognised at their fair values at the acquisition date.
As a result of applying reverse acquisition accounting since 30
January 2009, the consolidated IFRS financial information of
dotdigital Group Plc is a continuation of the financial information
of dotmailer Limited.
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and services in the ordinary
course of the Group's activities. Revenue is shown net of value
added tax returns, rebates and discounts after eliminating sales
within the Group.
The Group recognises revenue when the amount of revenue can be
reliably measured and it is probable that the future economic
benefits will flow to the entity. The Group bases its estimates on
historical results, taking into consideration the type of customer,
the type of transaction and the specifics of each arrangement.
The Group sells omni-channel marketing services to other
businesses and services are either provided on a usage basis or
fixed price bespoke contract. Revenue from contracts are recognised
under percentage of completion method based on a percentage of
services performed to date as a percentage of the total services to
be performed.
Going concern
The Directors, at the time of approving the financial
statements, have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
for the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the financial statements.
Further detail is contained in the Directors' report.
Operating profit
Operating profit is stated after charging operating expenses but
before finance costs.
Dividends
Final dividend distributions to the Company's shareholders are
recognised as a liability in the financial statements in the period
in which the dividends are approved by the Company's shareholders
while interim dividends distributions are recognised in the period
in which the dividends are declared and paid.
.
Goodwill
Goodwill represents the excess of the fair value of the
consideration over the fair values of the identifiable net tangible
and intangible assets acquired and is allocated to cash generating
units.
Under IFRS 3 "Business Combinations", goodwill arising on
acquisitions is not subject to amortisation but is subject to
annual impairment testing. Any impairment is recognised immediately
in the income statement and not subsequently reversed.
Investments in subsidiaries
Investments are held as non-current assets at cost less any
provision for impairment. Where the recoverable amount of the
investment is less than the carrying amount, impairment is
recognised.
Intangible assets
Intangible assets are recorded as separately identifiable assets
and recognised at historical cost less any accumulated
amortisation. These assets are amortised over their useful economic
lives of four to five years, with the charge included in
administrative expenses in the income statement.
Intangible assets are reviewed for impairment annually.
Impairment is measured by determining the recoverable amount of an
asset or cash generating unit (CGU) which is the greater of its
value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset or
CGU. For the purpose of impairment testing, assets that cannot
be tested individually are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or CGU.
- Domain names
Acquired domain names are shown at historical cost. Domain names
have a finite life and are carried at cost less accumulated
amortisation. Amortisation is calculated using straight-line method
to allocate the cost of domain names over their useful lives of
four years.
- Software
Acquired software and websites are shown at historical cost.
They have a finite life and are carried at cost less accumulated
amortisation. Amortisation is calculated using straight-line method
to allocate the cost of software and websites over their useful
lives of four years.
- Product development
Product development expenditure is capitalised when it is
considered that there is a commercially and technically viable
product, the related expenditure is separately identifiable and
there is a reasonable expectation that the related expenditure will
be exceeded by future revenues. Following initial recognition,
product developments are carried at cost less any accumulated
amortisation and any accumulated impairment losses. The useful
lives of these intangible assets are assessed to have a finite life
of five years. Amortisation is charged on assets with finite lives,
and until economic benefit can be received and recognised, this
expense is taken to the income statement and useful lives are
reviewed on an annual basis. Amortisation is charged from the point
when the asset is available for use.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred. Capitalised development
costs are recorded as intangible assets and amortised from the
point at which they are ready for use on a straight-line basis over
their useful life.
Costs incurred on development projects (relating to the design
and testing of new or improved products) are recognised as
intangible assets when the following criteria are fulfilled:
- It is technically feasible to complete the intangible asset so
that it will be available for use or resale;
- Management intends to complete the intangible asset and use or
sell it;
- There is an ability to use or sell the intangible assets;
- It can be demonstrated how the intangible asset will generate
possible future economic benefits;
- Adequate technical, financial and other resource to complete
the development and to use or sell the intangible asset are
available; and
- The expenditure attributable to the intangible asset during
its development can be reliably measured.
-Technology
Technology represents the cost that would be incurred to build
the entire Comapi platform had the acquisition not occurred. The
useful life of this intangible asset is assessed to have a finite
life of 10 years. Amortisation is charged on assets with finite
lives, and until economic benefit can be received and recognised,
this expense is taken to the income statement and useful lives are
reviewed on an annual basis. Amortisation is charged from the point
when the asset is available for use.
-Customer relationships
This represents the value of high value customer contracts
within Comapi. The useful life of this intangible asset is assessed
to have a finite life of 9 years. Amortisation is charged on assets
with finite lives, and until economic benefit can be received and
recognised, this expense is taken to the income statement and
useful lives are reviewed on an annual basis. Amortisation is
charged from the point when the asset is available for use.
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash generating unit to
which the asset belongs. An intangible asset with an indefinite
useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Property, plant and equipment
Tangible non-current assets are stated at historical cost less
accumulated depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are included in the assets' carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits are associated with the item
will flow to the company and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Depreciation is provided at the following rates in order to write
off each asset over its estimated useful life and is based on the
cost of assets less residual value. Significant components of
individual assets are assessed and if a component has a useful life
that is different from the remainder of that asset, that component
is depreciated separately.
Short leasehold: over the term of the lease
Fixtures and fittings: 25% on cost
Computer equipment: 25% on cost
The assets' residual values and useful economic lives are
reviewed and adjusted, if appropriate, at each reporting date. An
asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable value.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within other
(losses) or gains in the income statement.
Capital risk management
The Group manages its capital to ensure it is able to continue
as a going concern while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The
capital structure of the Group consists of cash equivalents and
equity attributable to the owners of the parent as disclosed in the
statement of changes in equity.
Taxation
The tax expense for the year comprises current and deferred tax.
Tax is recognised in the income statement, to the extent that it
relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
Current tax
Current taxes are based on the results shown in the financial
statements and are calculated according to local tax rules, using
tax rates enacted or substantially enacted by the balance sheet
date.
Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial
statements.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary difference will be utilised.
Deferred income tax is determined using tax rates that have been
enacted or substantially enacted by the balance sheet date and are
expected to apply when the related deferred income asset is
realised or deferred income tax liability is settled.
Operating leases
Rent payable under operating leases is not recognised in the
Group's statement of financial position. Such costs are expensed on
a straight-line basis over the term of the lease. Lease incentives
received are recognised as an integral part of the total expense,
over the term of the lease.
Financial instruments
Financial assets and financial liabilities are recognised on the
statement of financial position when an entity becomes a party to
the contractual provisions of the instruments. Financial assets and
financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through
profit or loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair
value through
profit or loss are recognised immediately in the income
statement.
- Financial assets
The Group's accounting policies for financial assets are set out
below.
Management determine the classification of its financial assets
at initial recognition depending on the purpose for which the
financial assets were acquired and, where allowed and appropriate,
revaluate this designation at every reporting date.
All financial assets are recognised on a trade date when, and
only when, the Group becomes a party to the contractual provisions
of an instrument. When financial assets are recognised initially,
they are measured at fair value plus transaction costs, except for
those finance assets classified as at fair value through profit or
loss ('FVTPL'), which are initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets at FVTPL, 'held-to-maturity'
investments, 'available for sale' (AFS) financial assets and loans
and receivables. The classification depends on the nature and
purpose of the financial assets and is determined at the time of
recognition.
Derecognition of financial assets occurs when the rights to
receive cash flows from the investments expire or are transferred
and substantially all of the risks and rewards of ownership have
been transferred.
At each reporting date, financial assets are reviewed to assess
whether there is objective evidence of impairment. If any such
evidence exists, impairment loss is determined and recognised based
on the classification of the financial asset.
Loans and receivables (including trade receivables, prepayments,
deposits and other receivables, cash and bank balances) are
non-derivative financial assets with fixed or determinable payments
that are not quoted on an active market. At each reporting date
subsequent to initial recognition, loans and receivables are
carried at amortised cost using the effective interest method, less
any identified impairment losses. An impairment loss is recognised
in the statement of comprehensive income when there is objective
evidence that the asset is impaired, and is measured as the
difference between the asset's carrying amount and the present
value of estimated future cash flows discounted at the original
effective interest rate. Impairment losses are reversed in
subsequent periods when an increase in the asset's recoverable
amount can be related objectively to an event occurring after the
impairment was recognised, subject to a restriction that the
carrying amount of the asset at the date the impairment is reversed
does not exceed what the amortised cost would have been had the
impairment not been recognised.
- Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand,
demand deposits with banks and other financial institutions, and
short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an
insignificant risk of changes in value, having been within three
months of maturity at acquisition. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash
management are also included as a component of cash and cash
equivalents for the purpose of the consolidated statement of cash
flows
- Trade receivables
Trade receivables are recognised initially at the lower of their
original invoiced value and recoverable amount. A provision is made
when it is likely that the balance will not be recovered in full.
Terms on receivables range from 30 to 90 days.
- Financial liabilities and equity
Financial liabilities and equity are recognised on the Group's
statement of financial position when the Group becomes a party to a
contractual provision of an instrument. Financial liabilities and
equity instruments issued by the Group are classified according to
the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument. An
equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of transaction costs.
The Group's financial liabilities include trade payables and
accrued liabilities.
- Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method. Terms on accounts payable range from 10 to 90
days.
Foreign currency risk
Currency risk is the risk that the holding of foreign currencies
will affect the Group's position as a result of a change in foreign
currency exchange rates. The Group has no significant foreign
currency risk as most of the Group's financial assets and
liabilities are denominated in functional currencies of relevant
Group entities. Accordingly, no quantitative market risk
disclosures or sensitivity analysis for currency risks have been
prepared.
The results and nancial position of all the Group entities (none
of which has the currency of a hyper-in ationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
(a) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
(b) income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
(c) all resulting exchange differences are recognised in other
comprehensive income.
Equity
Share capital is the amount subscribed for shares at their
nominal value.
Share premium represents the excess of the amount subscribed for
the share capital over the nominal value of the respective shares
net of share issue expenses.
Retained earnings represent the cumulative earnings of the Group
attributable to equity shareholders.
The reverse acquisition reserve relates to the adjustment
required by accounting for the reverse acquisition in accordance
with IFRS 3 'Business combinations'.
Other reserves relate to the charge for share-based payments in
accordance with IFRS 2 'Share-based Payments'.
Share-based payments
For equity-settled share-based payment transactions the Group,
in accordance with IFRS 2 'Share-Based Payments' measures their
value, and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted. The
fair value of those equity instruments is measured at the grant
date using the trinomial method. The expense is apportioned over
the vesting period of the financial instrument and is based on the
number which is expected to vest and the fair value of those
financial instruments at the date of grant. If the equity
instruments granted vest immediately, the expense is recognised in
full.
Functional currency translation
- Functional and presentation currency
Items included in the financial statements of the Company are
measured using the currency of the primary economic environment in
which the entity operates (functional currency), which is mainly
pounds sterling (GBP) and it is this currency the financial
statements are presented in.
- Transaction and balances
Foreign currency transactions are translated into the functional
currency using exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at the
year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement.
Employee benefit costs
The Group operates a defined contribution pension scheme.
Contributions payable by the Group's pension scheme are charged to
the income statement in the period in which they relate.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker,
who is responsible for allocating resources and assessing
performance of the operating segments as identified by the Board of
Directors.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below:
Judgements
(a) Capitalisation of development costs
Our business model is underpinned by our email and data-driven
omni--channel marketing automation platform, dotmailer. Internal
activities are continually undertaken to enhance and maintain the
product in a bid to stay ahead of our competition. Management
review the work of developers during the period and make the
following judgements:
-Internal work relating to product development is reviewed
against IAS 38 criteria and will be capitalised if management feel
the criteria have been met.
-Internal work relating to the maintenance of existing products
is expensed to the income statement and accounted for in payroll
costs.
(b) Valuation of intangibles
The recognition of business combinations requires the excess of
the purchase price of acquisitions over the net book value of
assets acquired to be allocated to the assets and liabilities of
the acquired entity. The Group makes judgements and estimates in
relation to the fair value allocation of the purchase price. If any
unallocated portion is positive it is recognised as goodwill and if
negative, it is recognised in the consolidated income
statement.
Judgement is required in determining the fair value of
identifiable assets, liabilities and contingent assets and
liabilities assumed in a business combination and the fair value of
the consideration payable. Calculating the fair values involves the
use of significant estimates and assumptions, including
expectations about future cash flows, discount rates and the lives
of assets following purchase.
Estimates and assumptions
(a) Estimated impairment of goodwill
The Directors have carried out a detailed impairment review in
respect of goodwill. The Group assesses at each reporting date
whether there is an indication that an asset may be impaired, by
considering the net present value of discounted cash flow forecasts
which have been discounted at 10%. The cash flow projections are
based on the assumption that the Group can realise projected sales.
A prudent approach has been applied with no residual value being
factored
Further details on the estimates and assumptions we make in our
annual impairment testing of goodwill are included in note 12 to
the Financial Statements. At the period end, based on the
assumptions, there was no indication of impairment to the carrying
value of goodwill.
(b) Share-based compensation
Key management believe that there will not be only one
acceptable choice for estimating the fair value of share-based
payment arrangements. The judgements and estimates that management
apply in determination of the share-based compensation are
summarised below:
-Selection of a valuation model
-Making assumptions used in determining the variables used in a
valuation model
i. expected life
ii. expected volatility
iii. expected dividend yield
iv. interest rate
Further detail on the estimates and assumptions we make in our
share-based compensation are included in note 27 to the financial
statements. The charge made to income statement for period is also
disclosed here.
(c) Depreciation and amortisation
The Group depreciates short leasehold, fixtures and fittings,
computer equipment and amortises computer software, internally
generated development costs and domain names on a straight-line
method over the estimated useful lives. The estimated useful lives
reflect the Directors' estimate of the periods that the Group
intends to derive future economic benefits from the use of the
Group's short leasehold fixtures and fittings, computer equipment,
computer software, internally generated development costs and
domain names.
(d) Bad debt provision
We perform ongoing credit evaluations of our customers and grant
credit based upon past payment history, financial condition and
anticipated industry conditions. Customer payments are regularly
monitored and a provision for doubtful accounts is established
based upon specific situations and overall industry conditions.
Hence the provision is maintained for potential credit losses based
upon management's assessment of the expected collectability of all
accounts receivable. In making this assessment, management take
into consideration (i) any circumstances of which we are aware
regarding a customer's inability to meet its financial obligations
and (ii) our judgements as to potential prevailing economic
conditions in the industry and their potential impact on the
Group's customers.
3. SEGMENTAL REPORTING
On the 21 November 2017, the Group completed the acquisition of
Comapi whose line of business is the provision of omni-channel
messaging and cloud communication. dotmailer's single line of
business remains the provision of data-driven omni-channel
marketing automation. The chief operating decision-maker considers
the Group's segments to be by geographical location, this being UK,
US and rest of the world ("RoW") operations and by business
activity, this being dotmailer and Comapi as shown below:
Geographical revenue and results
30.6.2018
--------------------------------------
UK US RoW Total
GBP'000 GBP'000 GBP'000 GBP'000
Income statement
Revenue 33,471 5,257 4,366 43,094
Gross profit 25,412 4,578 4,030 34,020
Profit before income
tax 5,180 1,877 2,186 9,243
-------- -------- -------- --------
Total comprehensive
income attributable
to the owners of the
parent 4,640 1,732 2,186 8,558
======== ======== ======== ========
Financial position
Total assets 45,136 2,183 942 48,261
Net current assets 15,260 1,804 672 17,736
======== ======== ======== ========
Revenue from external customers is attributed to the
geographical segments noted above based on the customers' location.
There were no customers who account for more than 10% revenue
(2017: none).
30.6.2017
--------------------------------------
UK US RoW Total
GBP'000 GBP'000 GBP'000 GBP'000
Income statement
Revenue 24,743 3,907 3,316 31,966
Gross profit 21,291 3,293 2,923 27,507
Profit before income
tax 4,779 1,062 2,250 8,091
-------- -------- -------- --------
Total comprehensive
income attributable
to the owners of the
parent 3,929 967 2,250 7,146
======== ======== ======== ========
Financial position
Total assets 32,578 1,556 302 34,436
Net current assets 21,961 1,120 213 23,294
======== ======== ======== ========
Business activity revenue and results
30.6.2018
Dotmailer Comapi* Total
GBP'000 GBP'000 GBP'000
Income statement
Revenue 36,891 6,203 43,094
Gross profit 32,266 1,754 34,020
Profit before income
tax 8,619 624 9,243
---------- -------- --------
Total comprehensive
income attributable
to the owners of the
parent 7,936 622 8,558
========== ======== ========
Financial position
Total assets 44,413 3,848 48,261
Net current assets/(liabilities) 17,944 (208) 17,736
========== ======== ========
30.6.2017
Dotmailer Comapi* Total
GBP'000 GBP'000 GBP'000
Income statement
Revenue 31,966 - 31,966
Gross profit 27,507 - 27,507
Profit before income
tax 8,091 - 8,091
---------- -------- --------
Total comprehensive
income attributable
to the owners of the
parent 7,146 - 7,146
========== ======== ========
Financial position
Total assets 34,436 - 34,436
Net current assets 23,294 - 23,294
========== ======== ========
*The numbers included within Comapi are from the date of
acquisition being 21 November 2017.
4. EMPLOYEES AND DIRECTORS
30.6.18 30.6.17
GBP'000 GBP'000
Wages and salaries 14,149 11,217
Social security costs 1,562 1,146
Other pension costs 291 252
--------------------- -------------------
16,002 12,615
===================== ===================
The average monthly number of employees during the year is as follows
30.6.18 30.6.17
Directors 5 6
Sales and Marketing product 150 120
Development and system engineers 71 56
Administration 53 56
--------------------- -------------------
279 238
===================== ===================
During the year the Group also capitalised staff-related costs of GBP4,023,222 (2017: GBP2,072,417)
in relation to internally generated development costs.
5. EXCEPTIONAL COSTS
Exceptional costs incurred in the year relate to the one-off acquisition costs of Comapi
of GBP208,805 (2017:
GBPnil) and amortisation of acquired intangibles of GBP148,110 (2017: GBPnil).
6. NET FINANCE INCOME
30.6.18 30.6.17
GBP'000 GBP'000
Finance income:
Deposit account interest 9 15
--------------------- -------------------
9 15
===================== ===================
7. OPERATING PROFIT
Costs by nature
Profit from continuing operations has been arrived after charging/(crediting):-
30.6.18 30.6.17
GBP'000 GBP'000
Direct marketing 4,586 2,073
Outsourcing 2,121 186
Other costs 2,367 2,200
-------- ----------
Total cost of sales 9,074 4,459
======== ==========
30.6.18 30.6.17
GBP'000 GBP'000
Staff related costs (inc Directors emoluments) - note 4 16,002 12,615
Operating leases: Land and buildings 937 954
Operating lease: Other 38 43
Audit remuneration 49 40
Amortisation of intangibles 1,971 1,544
Depreciation charge 495 494
Legal, professional and consultancy fees 518 424
Computer expenditure 2,161 1,809
Bad debts 22 8
Foreign exchange (gains)/losses 124 (21)
Travel and subsistence costs 501 425
Office running 152 158
Staff welfare 406 301
Other costs 603 475
-------- ----------
Total administration costs 23,979 19,269
======== ==========
During the year the Group obtained the following services from the Group's auditor at costs
detailed below:
30.6.18 30.6.17
GBP'000 GBP'000
Fees payable to the Company's auditor for the audit of Parent Company and consolidated
financial
statements 8 8
Fees payable to the Company's auditor for other services 37 28
* audit of Company subsidiaries
* non-audit fees: Tax and review of interim accounts 4 4
-------- --------
49 40
======== ========
8. INCOME TAX EXPENSE
Analysis of the tax charge from continuing operations:
30.6.18 30.6.17
GBP'000 GBP'000
Current tax on profits for the year 259 847
Deferred tax on origination and reversal of timing differences 426 98
-------- --------
685 945
Factors affecting the tax charge:
30.6.18 30.6.17
GBP'000 GBP'000
Profit on ordinary activities before tax 9,243 8,091
======== ========
Profit on ordinary activities multiplied by the standard rate of corporation tax in
the UK
of 19% (2017: 19.75%) 1,756 1,598
Effects of:
Expenses not deductible 137 12
Research and development enhanced claim (1,908) (1,004)
Expenditure permitted on exercising options (217) (141)
Overseas tax losses 72 64
Capital allowances in excess of depreciation 419 318
-------- --------
Total income tax 259 847
======== ========
Deferred tax was calculated using the rate 19% (2017: 19.75%).
For further details on deferred tax see note 23.
Taxation for each region is calculated at the rates prevailing
in the respective jurisdiction
A reduction in the UK corporation tax rate to 19% (effective
from 1 April 2017) and to 18% (effective 1 April 2020)
were substantively enacted on 26 October 2015, and an additional
reduction to 17% (effective 1 April 2020) was
substantively enacted on 6 September 2016. This will reduce the
Company's future current tax charge accordingly.
UK deferred tax assets and liabilities have been recognised at
the rate applying in the period they are expected to
unwind.
9. PROFIT OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the
profit and loss account of the parent Company is not presented as
part of these financial statements. The parent Company's profit
before exceptional items for the financial year was GBP5,055,276
(2017: loss: GBP390,345)
10. DIVIDS
Amounts recognised as distributions to equity holders in the period
30.6.18 30.6.17
GBP'000 GBP'000
Paid dividend for year end 30 June 2018 of 0.505p (2017: 0.857p) per share 1,505 2,449
====== ========
Proposed dividend for the year end 30 June 2018 of 0.64p (2017: 0.55p) per share 1,907 1,629
====== ========
The proposed final dividend is subject to approval by the shareholders at the Annual General
Meeting and has not been included as a liability in these financial statements.
11. EARNINGS PER SHARE
Earnings per share data is based on the consolidated profit
using and the weighted average number of shares in issue of the
parent Company. Basic earnings per share are calculated by dividing
the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the
period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares. Adjusted earnings per share is
based on the consolidated profit deducting the acquisition related
exceptional costs and share-based payment.
A number of non-IFRS adjusted profit measures are used in this
annual report and financial statements. Adjusting items are
excluded from our headline performance measures by virtue of their
size and nature, in order to reflect management's view of the
performance of the Group. Summarised below is a reconciliation
between statutory results to adjusted results. The Group believes
that alternative performance measures such as adjusted EBITDA are
commonly reported by companies in the markets in which it competes
and are widely used by investors in comparing performance on a
consistent basis without regard to factors such as depreciation and
amortisation, which can vary significantly depending upon
accounting methods (particularly when acquisitions have occurred),
or based on factors which do not reflect the underlying performance
of the business. The adjusted profit after tax earnings measure is
also used for the purpose of calculating adjusted earnings per
share.
Reconciliations to earnings figures used in arriving at adjusted
earnings per share are as follows:
30.6.18 30.6.17
From continuing operations GBP'000 GBP'000
Profit for the year attributable
to the owners of the parent 8,558 7,146
Amortisation of
acquisition related 148 -
intangible fixed
asset (see note
13)
Other exceptional 209 -
costs
Share based payment 450 162
Adjusted profit for the
year attributable to
the owners of the parent 9,365 7,308
======== ========
Management does not consider the above adjustments to reflect
the underlying business performance.
The other exceptional costs relate to one-off acquisition costs
of Comapi.
30.6.18
----------------------------------------------------------------------------------
Weighted
average Per share
From continuing operations Earnings number of Amount
GBP'000 shares Pence
Basic EPS
Profit for the year attributable
to the owners of the parent 8,558 296,596,304 2.89
Adjusted Basic EPS
Adjusted profit for the year
attributable to the owners
of the parent 9,365 296,596,304 3.16
Options and warrants - 3,728,052 -
--------- ------------ ----------
Diluted EPS
Profit for the year attributable
to the owners of the parent 8,558 300,324,356 2.85
Adjusted Diluted EPS
Adjusted profit for the year attributable
to the owners of the parent 9,365 300,324,356 3.12
========= ============ ==========
30.6.17
-------------------------------------------
Weighted
average Per share
From continuing operations Earnings number of Amount
GBP'000 shares Pence
Basic EPS
Profit for the year attributable
to the owners of the parent 7,146 295,457,101 2.42
Adjusted Basic EPS
Adjusted profit for the year
attributable to the owners
of the parent 7,308 295,457,101 2.47
Options and Warrants - 1,061,738 -
--------- -------------- ----------
Diluted EPS
Profit for the year attributable
to the owners of the parent 7,146 296,518,839 2.41
Adjusted Diluted EPS
Adjusted profit for the year attributable
to the owners of the parent 7,308 296,518,839 2.46
========= ============== ==========
Weighted average number of shares
30.6.18 30.6.17
Shares Shares
Basic EPS 296,596,304 295,457,101
============ ============
Diluted EPS 300,324,356 296,518,839
============ ============
12. GOODWILL
Group
30.6.18 30.6.17
COST GBP'000 GBP'000
At 1 July 4,121 4,121
Additions 9,071 -
-------- --------
At 30 June 13,192 4,121
-------- --------
AMORTISATION
At 1 July 3,512 3,512
Impairment - -
-------- --------
At 30 June 3,512 3,512
-------- --------
NET BOOK VALUE 9,680 609
======== ========
On 21 November 2017, the Group acquired all the voting rights of
Comapi for a cash consideration of GBP10.7m (which includes the
payment of loans in Comapi) in exchange for all Comapi shares, with
a potential consideration of GBP1.2m in share options for the
management team, dependent on them achieving specific performance
targets over a 2-year post acquisition period and remaining with
the business. Comapi's business is the provision of omni-channel
messaging and cloud communication.
The Directors believe the acquisition will:
-- Extend dotdigital's marketing automation platform to provide
an industry leading solution offering fully integrated omni-channel
and conversational commerce support to marketers,
-- Enable dotdigital to deliver aligned conversational messaging
across channels including email, mobile push, SMS, Facebook
messenger, Apple business messenger, Twitter and live chat
-- Enable dotdigital customers to meet consumer demand for a
more personalised communication experience and
-- Position dotdigital as the most advanced platform on the
market and make dotdigital more relevant in the strategic mobile
first Asian market.
Goodwill of GBP9.1m was recognised on the acquisition, being the
excess of the purchase consideration over the provisional fair
value of net assets acquired as set out below and represents
Comapi's platform, key customer relationships, employee knowledge
and skills and the acceleration of bringing the technology to our
platform rather than building in-house.
Provisional Fair value of assets acquired
GBP'000s
Net assets acquired
Identifiable intangible
assets
Technology 1,205
Customer relationships 1,200
Deferred tax recognised on identifiable intangible assets
Technology (228)
Customer relationships (229)
Development costs 501
Property, plant and equipment 42
Trade and other receivables 1,156
Cash and cash equivalents 158
Trade and other
payables (2,497)
Tax payable (643)
Net identifiable assets acquired 665
Goodwill 9,071
----------
Total consideration 9,736
==========
Purchase consideration 9,736
Cash acquired (158)
----------
Consideration net of cash acquired 9,578
==========
The results of the acquired entity which have been consolidated
in the income statement from 22 November 2017 contributed GBP6.2m
of revenues and a profit of GBP0.6m to the profit attributable to
equity shareholders of the Group during the year. Had Comapi been
acquired at the start of the year, the contribution would have been
GBP10.0m of revenue and a profit of GBP0.4m.
Goodwill is allocated to the Group's two cash generating units
identified, that being dotmailer and Comapi. The goodwill addition
in the year ended 30 June 2018 relates to the acquisition of Comapi
and the goodwill at the beginning of the period relates to
dotmailer.
Goodwill arising on business combinations is not amortised but
is reviewed for impairment on an annual basis, or more frequently
if there are indications that goodwill may be impaired. Goodwill
acquired in a business combination is allocated, at acquisition, to
cash generating units (CGUs) that are expected to benefit from that
business combination.
The carrying amount of goodwill relates to the Group's two
trading activities and business segments. This has been tested for
impairment during the current period by comparison with the
recoverable amounts of the CGU. Recoverable amounts for CGUs are
based on the higher of value in use and fair value less costs to
sell. The recoverable amounts of the CGU have been determined from
value in use calculations. These calculations use pre-tax cash flow
projections based on financial budgets approved by management
covering a five-year period. The key assumptions for the value in
use calculations are those regarding discount rates, growth rates,
and expected changes in margins. Management estimates discount
rates using pre-tax rates that reflect the current market
assessment of the time value of money and the risks specific to the
CGUs. Changes in income and expenditure are based on past
experience and expectations of the future changes in the market.
The pre-tax discount rate used to calculate the value in use is 10%
(2017: 10%). The valuations indicate sufficient headroom such that
a reasonably possible change in key assumptions would not result in
impairment of goodwill.
13. INTANGIBLE ASSETS
Group
Customer
relationships Technology
GBP'000 GBP'000
COST
At 1 July 2017 - -
Additions - -
Introduced on acquisition 1,205 1,200
-------------- -----------
At 30 June 2018 1,205 1,200
-------------- -----------
AMORTISATION
At 1 July 2017 - -
Amortisation for the year - -
Introduced on acquisition 78 70
-------------- -----------
At 30 June 2018 78 70
-------------- -----------
NET BOOK VALUE
At 30 June 2018 1,127 1,130
============== ===========
Group
Internally
generated
Computer development Domain
software costs names Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2017 497 10,351 16 10,864
Additions 94 4,377 - 4,471
Introduced on acquisition 215 558 21 3,199
At 30 June 2018 806 15,286 37 18,534
AMORTISATION
At 1 July 2017 320 6,009 16 6,345
Amortisation for the
year 76 1,891 4 1,971
Introduced on acquisition 215 57 11 431
At 30 June 2018 611 7,957 31 8,747
NET BOOK VALUE
At 30 June 2018 195 7,329 6 9,787
Internally
generated
Computer development Domain
software costs names Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2016 362 8,107 16 8,485
Additions 135 2,244 - 2,379
----------- ------------- --------- --------
At 30 June 2017 497 10,351 16 10,864
----------- ------------- --------- --------
AMORTISATION
At 1 July 2016 264 4,521 16 4,801
Amortisation for the
year 56 1,488 - 1,544
----------- ------------- --------- --------
At 30 June 2017 320 6,009 16 6,345
----------- ------------- --------- --------
NET BOOK VALUE
At 30 June 2017 177 4,342 - 4,519
=========== ============= ========= ========
Development cost additions represents resources the Group have
invested in the development of new innovative and ground breaking
technology products for marketing professionals. This platform
allows them to create, send and automate marketing campaigns.
Following development of the products the Group intends to licence
the use of the platform.
Technology represents the cost that would be incurred to build
the entire Comapi platform had the acquisition not occurred.
Customer relationships represent the value of high value customer
contracts within Comapi.
14. PROPERTY, PLANT AND EQUIPMENT
Group
Short Fixtures Computer
&
leasehold fittings equipment Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2017 499 534 1,393 2,426
Additions 46 88 341 475
Disposals - (28) (18) (46)
Introduced on
acquisition 68 50 284 402
Exchange differences (1) (1) - (2)
At 30 June 2018 612 643 2,000 3,255
---------- --------- ---------- --------
DEPRECIATION
At 1 July 2017 214 379 800 1.393
Depreciation
for the year 62 91 342 495
Eliminated of
disposal - (24) (17) (41)
Introduced on
acquisition 64 34 264 362
Exchange differences - 1 (1) -
At 30 June 2018 340 481 1,388 2,209
---------- --------- ---------- --------
NET BOOK VALUE
At 30 June 2018 272 162 612 1,046
========== ========= ========== ========
Short Fixtures Computer
&
leasehold fittings equipment Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2016 444 448 1,760 2,652
Additions 55 86 234 375
Disposals - - (601) (601)
At 30 June 2017 499 534 1,393 2,426
---------- --------- ---------- --------
DEPRECIATION
At 1 July 2016 147 293 1,070 1,510
Depreciation
for the year 67 86 341 494
Eliminated on
disposal - - (611) (611)
At 30 June 2017 214 379 800 1,393
---------- --------- ---------- --------
NET BOOK VALUE
At 30 June 2017 285 155 593 1,033
========== ========= ========== ========
15. INVESTMENTS
Company
Shares in Shares in
Group Group
undertakings undertakings
30.6.18 30.6.17
COST GBP'000 GBP'000
At 1 July 2017 8,706 8,705
Additions 9,737 1
At 30 June 2018 18,443 8,706
AMORTISATION
At 1 July 2017 and 30 June 2018 3,519 3,519
NET BOOK VALUE
At 30 June 2018 14,924 5,187
============= =============
The Group's or the Company's investments at the balance sheet
date in the share capital of companies include the following:
Subsidiaries Nature of business Class of share Proportion of
voting power
held %
dotmailer Limited Web and email-based Ordinary 100
marketing Ordinary A 100
dotsurvey Limited Dormant Ordinary 100
dotsearch Europe Limited Branch company Ordinary 100
dotcommerce Limited Dormant Ordinary 100
doteditor Limited Dormant Ordinary 100
dotSEO Limited Dormant Ordinary 100
dotagency Limited Dormant Ordinary 100
dotmailer Inc Web and email-based Ordinary 100
marketing
dotmailer Pty Limited Web and email-based Ordinary 100
marketing
dotmailer Development Ltd Holding company Ordinary 100
dotmailer SA Pty Development hub Ordinary 100
dotmailer LLC Development hub Ordinary 100
Dynmark International Ltd Omni-channel communication platform Ordinary 100
Dynmark S.p z.o.o Omni-channel communication platform Ordinary 100
Donky Networks Ltd Omni-channel communication platform Ordinary 100
All of the above subsidiaries have been included within the
consolidated results. All the above companies with the exception of
dotmailer Inc, dotmailer SA Pty, dotmailer LLC, dotmailer Pty
Limited and Dynmark S.p. z.o.o were incorporated in England and
Wales. dotmailer Inc was incorporated in Delaware (US), dotmailer
Pty Limited was incorporated in New South Wales (Australia),
dotmailer SA Pty was incorporated in South Africa, dotmailer LLC
was incorporated in the Republic of Belarus and Dynmark S.p. z.o.o.
was incorporated in Poland.
16. TRADE AND OTHER RECEIVABLES
Group Company
30.6.18 30.6.17 30.6.18 30.6.17
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Trade receivables 8,677 6,425 - -
Less: Provision for
impairment of trade
receivables (403) (502) - -
-------- -------- -------- --------
Trade receivables
- net 8,274 5,923 - -
Other receivables 151 111 - -
Amounts owed by Group
undertakings - - 966 4,609
VAT - - 12 14
Tax receivable 312 - - -
Prepayments and accrued
income 4,216 1,813 127 10
-------- -------- -------- --------
12,953 7,847 1,105 4,633
======== ======== ======== ========
Further details on the above can be found in note 22.
Included within prepayments is an amount of GBP852,504 (2017:
GBP621,065) in relation to deferred commission which is considered
to be long term.
17. CASH AND CASH EQUIVALENTS
Group Company
30.6.18 30.6.17 30.6.18 30.6.17
GBP'000 GBP'000 GBP'000 GBP'000
Bank accounts 15,005 20,428 646 591
15,005 20,428 646 591
======== ======== ======== ========
Further details on the above can be found in note 22.
18. CALLED UP SHARE CAPITAL
Allotted, issued, fully paid Nominal 30.6.18 30.6.17
number value GBP'000 GBP'000
298,030,565 (2017: 296,238,485) GBP0.005 1,490 1,481
-------- --------
1,490 1,481
======== ========
During the reporting period the Company undertook the following
transactions involving the issuing and reclassifying of issued
share capital:
On 28 November 2017 a number of employees exercised their share
options increasing the issued share capital by 250,000 shares at a
premium price of 95.5p.
On 11 May 2018 a number of employees exercised their share
options increasing the issued share capital by 1,542,080 shares at
a premium price of 91.5p.
19. RESERVES
Group
Reverse
Retained Share acquisition
earnings premium reserve
GBP'000 GBP'000 GBP'000
As at 1 July 2017 25,306 6,290 (4,695)
Issue of share capital - 501 -
Dividends (1,627) - -
Profit for the year 8,558 - -
Transfer of reserves 94 - -
Other comprehensive income: Currency - - -
translation
Share-based payment - - -
--------- -------- -------------
Balance as at 30 June 2018 32,331 6,791 (4,695)
========= ======== =============
19. RESERVES - continued
Retranslation Other
Reserve reserves Totals
GBP'000 GBP'000 GBP'000
As at 1 July 2017 (46) 305 27,160
Issue of share capital - - 501
Dividends - - (1,627)
Profit for the year - - 8,558
Transfer of reserves - (94) -
Other comprehensive income: Currency
translation 20 - 20
Share-based payment - 450 450
-------------- --------- --------
Balance as at 30 June 2018 (26) 661 35,062
============== ========= ========
Group
Reverse
Retained Share acquisition
earnings premium reserve
GBP'000 GBP'000 GBP'000
As at 1 July 2016 20,611 6,138 (4,695)
Issue of share capital - 152 -
Dividends (2,479) - -
Profit for the year 7,146 - -
Transfer in reserves 28
Currency translation - - -
Share-based payment - - -
--------- -------- ---------------
Balance as at 30 June 2017 25,306 6,290 (4,695)
========= ======== ===============
Retranslation Other
reserve reserves Totals
GBP'000 GBP'000 GBP'000
As at 1 July 2016 8 174 22,236
Issue of share capital - (3) 149
Dividends - - (2,479)
Profit for the year - - 7,146
Transfer in reserves (28) -
Currency translation (54) - (54)
Share-based payment - 162 162
-------------- --------- --------
Balance as at 30 June 2017 (46) 305 27,160
============== ========= ========
19. RESERVES - continued
Company
Retained Share Other
earnings premium Reserves Totals
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2017 2,239 6,290 305 8,834
Issue of share capital - 501 - 501
Dividends (1,627) - - (1,627)
Profit for the year 5,055 - - 5,055
Transfer of reserves 94 - (94) -
Share-based payment - - 450 450
--------- -------- --------- --------
At 30 June 2018 5,761 6,791 661 13,213
========= ======== ========= ========
Company
Retained Share Other
earnings premium Reserves Totals
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2016 5,080 6,138 174 11,392
Issue of share capital - 152 (3) 149
Dividends (2,479) - - (2,479)
Loss for the year (390) - - (390)
Transfer in reserves 28 - (28) -
Share-based payment - - 162 162
--------- -------- --------- --------
At 30 June 2017 2,239 6,290 305 8,834
========= ======== ========= ========
20. TRADE AND OTHER PAYABLES
Group Company
30.6.18 30.6.17 30.6.18 30.6.17
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Trade payables 6,184 1,194 15 52
Amounts owed to Group - - 1,913 -
undertakings
Social security and
other taxes 480 415 - -
Other payables 60 32 - -
VAT 989 830 - -
Accruals and deferred
income 2,504 1,969 44 44
10,217 4,440 1,972 96
======== ======== ======== ========
Further details on liquidity and interest rate risk can be found
in note 22.
21. LEASING AGREEMENTS
Minimum lease payments under non-cancellable operating leases
fall due as follows:
30.6.18
Land &
Buildings Others Totals
GBP'000 GBP'000 GBP'000
Within one year 1,094 45 1,139
Between two to five years 1,310 55 1,365
---------- -------- --------
2,404 100 2,504
========== ======== ========
30.6.17
Land &
Buildings Others Totals
GBP'000 GBP'000 GBP'000
Within one year 591 27 618
Between two to five years 3,024 7 3,031
---------- -------- --------
3,615 34 3,649
========== ======== ========
Operating leases represent rents payable by the Group for its
office properties and car leases. Leases are negotiated for an
average term of five years and rentals are fixed on an average of
two years with the option to extend for a further five years at the
prevailing market rate at the time.
22. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Group's activities expose it to a number of financial risks
that include credit risk, liquidity risk, currency risk and
interest rate risk. These risks and the Group's policies for
managing them have been applied consistently during the year and
are set out below.
The Group holds no financial or other non-financial instruments
other than those utilised in the working operations of the Group
and that are listed in this note. It's the Group's policy not to
trade in derivative contracts.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument rate risk arises, are as follows:
-Trade receivables
-Cash and cash equivalents
-Trade and other payables
22. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - continued
Financial instruments by category
The following table sets out the financial instruments as at the
reporting date:
Group Company
30.6.18 30.6.17 30.6.18 30.6.17
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Trade and other receivables 12,953 7,847 139 24
Bank balances 15,005 20,428 646 591
27,958 28,275 785 615
======== ======== ======== ========
Financial liabilities
Trade payables 6,184 1,194 15 52
Amounts owed to group - - 1,913 -
undertakings
Accrued liabilities
and other payables 4,033 3,246 44 44
10,217 4,440 1,972 96
======== ======== ======== ========
The fair value of the financial assets and financial liabilities
is equal to their carrying values. All financial assets are
categorised as loans and receivables and all financial liabilities
are categorised as financial liabilities at amortised costs.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's risk committee. The Board receives quarterly reports from
the Risk Committee through which it reviews the effectiveness of
the processes put in place and the appropriateness of the
objectives and policies it sets.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Company's competitiveness and flexibility. Further details
regarding these policies are set out below:
Interest rate risk
The Group's interest rate risk arises from interest-bearing
assets and liabilities. The Group has in place a policy of
maximising finance income by ensuring that cash balances earn a
market rate of interest offsetting where possible cash balances,
and by forecasting and financing its working capital requirements.
As at the reporting date the Group was not exposed to any movement
in interest rates as it has no external borrowings and therefore is
not exposed to interest rate risk. No sensitivity analysis has been
prepared.
The Group's working capital requirements are managed through
regular monitoring of the overall cash position and regularly
updated cash flow forecasts to ensure there are sufficient funds
available for its operations.
Liquidity risk
The Group's working capital requirements are managed through
regular monitoring of the overall position and regularly updated
cash flow forecasts to ensure there are funds available for its
operations. Management forecasts indicate no new borrowing
facilities will be required in the upcoming financial period.
Trade and other payables of GBP7,233,000 (2017: GBP2,056,000)
are expected to mature in less than a year.
Credit risk
Credit risk arises principally from the Group's trade
receivables, as there are no trade receivables within the Company,
which comprise amounts due from customers. Prior to accepting new
customers a credit check is obtained. As at 30 June 2018 there were
no significant debts past their due period which had not been
provided for. The maturity of the Group's trade receivables is as
follows:
30.6.18 30.6.17
GBP'000 GBP'000
0-30 days 6,172 4,845
30-60 days 720 67
More than 60 days 1,785 1,513
8,677 6,425
======== ========
The maturity of the Group's provision for impairment is as
follows:
30.6.18 30.6.17
GBP'000 GBP'000
0-30 days - 8
30-60 days - 8
More than 60 days 403 486
403 502
======== ========
The movement in the provision for the impairment is as
follows:
30.06.18 30.6.17
GBP'000 GBP'000
As at 1 July 502 824
Provision for impairment 40 82
Receivable written off in
the year (72) (65)
Unused amount reversed (67) (339)
---------
As at 30 June 403 502
========= ========
The Group minimises its credit risk by profiling all new
customers and monitoring existing customers of the Group for
changes in their initial profile. The level of trade receivables
older than the average collection period consisted of a value of
GBP2,041,922 (2017: GBP1,581,391) of which GBP402,985 (2017:
GBP460,837) was provided for. The Group felt that the remainder
would be collected post year end as they were with long-standing
relationships, and the risk of default is considered to be low and
write-offs due to bad debts are extremely low. The Group has no
significant concentration of credit risk, with the exposure spread
over a large number of customers.
The credit risk on liquid funds is low as the counterparts are
banks with high credit ratings assigned by international credit
rating bodies. The majority of the Company's cash holdings are held
at NatWest Bank which has a BBB+ credit rating.
The carrying value of both financial assets and liabilities
approximates to fair value.
Capital policy
The Group's objectives when managing capital are to safeguard
its ability to continue as a going concern in order to provide
optimal returns for shareholders and to maintain an efficient
capital structure to reduce the cost of capital.
In doing so the Group's strategy is to maintain a capital
structure commensurate with a strong credit rating and to retain
appropriate levels of liquidity headroom to ensure financial
stability and flexibility. To achieve this, the Group monitors key
credit metrics, risk and fixed charge cover to maintain this
position. In addition the Group ensures a combination of
appropriate short term and long-term liquidity headroom.
During the year the Group had a short-term loan balance of
GBPnil (2017: GBPnil) and amounts payable over one year are nil
(2017: GBPnil). The Group had a strong cash reserve to utilise for
any short-term capital requirements that were needed by the
Group.
The Group has continued to look for a further long-term
investments or acquisitions and therefore, to maintain or re-align
the capital structure, the Group may adjust when dividends are paid
to shareholders, return capital to shareholders, issue new shares
or borrow from lenders.
23. DEFERRED TAX
30.6.18 30.6.17
GBP'000 GBP'000
As at 1 July 814 716
Current year provision 426 98
Provision on recognition of intangibles on 457 -
acquisition
1,697 814
======== ========
The deferred tax liability above comprises the following
temporary differences:
30.6.18 30.6.17
GBP'000 GBP'000
Capital allowances in excess of depreciation 607 113
R&D relief in excess
of amortisation 1,204 858
Share option relief (114) (157)
1,697 814
======== ========
Deferred tax provision relates to taxes to be levied by the same
authority on the same entity expected to be settled at the same
time. As such deferred tax assets and liabilities have been
offset.
24. CAPITAL COMMITMENTS
The Company and Group have no capital commitments as at the year
end.
25. RELATED PARTY DISCLOSURES
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Group
The following transactions were carried out with related
parties
30.6.18 30.6.17
GBP'000 GBP'000
Sale of services
Email
Entity under common marketing
Cadence Performance directorship services 2 2
Email
Cloudcall Group Entity under common marketing
Plc directorship services 16 -
18 2
======== ========
Year end balances arising
from sale of services
Email
Cloudcall Group Entity under common marketing
Plc directorship services 16 -
16 -
===
Directors
30.6.18 30.6.17
GBP'000 GBP'000
Aggregate emoluments 701 558
Ex-gratia payment 40 -
Company contributions to money purchase pension
scheme 26 50
Share-based payments from the LTIP options
granted 145 123
912 731
======== ========
Directors' pay summary does not include Non-Executive
Directors.
Information in relation to the highest paid Director is as
follows:
30.6.18 30.6.17
GBP'000 GBP'000
Salaries 395 372
Other benefits 12 10
Pension costs 13 25
Share-based payments on the LTIP
options granted 145 -
565 407
======== ========
Company
The following transactions were carried out with related
parties
30.06.18 30.06.17
GBP'000 GBP'000
Year end balances arising
from sales/purchase of services
dotmailer Limited Subsidiary Payables (5,350) (5,338)
(5,350) (5,338)
========= =========
The receivables and payables are unrestricted in nature and bear
no interest. No provisions are held against receivables from
related parties.
Loans to/from related parties
30.6.18 30.6.17
GBP'000 GBP'000
dotmailer Limited Subsidiary
As at 1 July 9,950 12,417
Loans advanced 97 40
Loans repaid (12,606) (2,507)
(2,559) 9,950
========= ========
26. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party of the Group. dotdigital
Group PLC acts as the parent Company to dotmailer Limited,
dotsearch Europe Limited, dotmailer Inc, dotmailer Pty Limited,
dotagency Limited (Dormant), dotsurvey Limited (Dormant), dotSEO
Limited (Dormant), dotcommerce Limited (Dormant), doteditor Limited
(Dormant), dotmailer Developments Limited, dotmailer SA Pty,
dotmailer LLC, Dynmark International Ltd, Dynmark S.p. z.o.o. and
Donky Networks Ltd.
27. SHARE-BASED PAYMENT TRANSACTIONS
The measurement requirements of IFRS 2 have been implemented in
respect of share options that were granted after 7 November 2002.
The expense recognised for share-based payment made during the year
is GBP450,000 (2017: GBP162,000).
Vesting conditions of the options dictate that employees must
remain in the employment of the Group for the whole period to
qualify.
Movement in issued share options during the year
The table illustrates the number and weighted average exercise
price (WAEP) of, and movements in, share options during the period.
The options outstanding at 30 June 2018 had a WAEP of 9.43p (2017:
33.35p) and a weighted average contracted life of 4.16 years (2017:
2.67 years) and their exercise prices ranged from 0.5p to 68.50p.
All share options are settled in form of equity issued.
30.06.18 30.6.17
No of options WAEP No of options WAEP
Outstanding at the
beginning of the
period 2,540,145 33.35p 4,104,029 26.69p
Granted during the
year 2,984,197 0.5p 230,985 68.50p
Forfeited/cancelled
during the period - 0p 706,460 35.30p
Exchanged for shares 1,792,080 28.46p 1,088,409 694.91p
------------------- ------------- ------------------- -------------
Outstanding at the
end of the period 3,732,262 9.43p 2,540,145 33.35p
------------------- ------------- ------------------- -------------
Exercisable at the
end of the period 517,080 34.57p 500,000 15.63p
The weighted average share price at the date of the exercise for share
options exercised during the period was 28.46p (2017: 694.91p).
20 25 28 18 October
June November November 2013
2017 2015 2014
Number of options
granted 230,985 809,160 1,525,000 3,554,794
Share price at
grant date 68.50p 40.50p 29.00p 17.82p
Exercise price 68.50p 40.25p 28.50p 18.25p
Option life in 5 years 5 years 5 years 5 years
years
Risk free rate 1.33% 1.33% 1.35% 1.40%
Expected volatility 30% 30% 30% 30%
Expected dividend
yield 1% 1% 0% 0.4%
Fair value of 12.04p 6.46p 5.33p 3.31p
options/warrants
19 21
December November
2017 2017
Number of options
granted 1,375,000 1,609,197
Share price at
grant date 85.95p 78.30p
Exercise price 0.50p 0.50p
Option life in 5 years 5 years
years
Risk free rate 1.33% 1.33%
Expected volatility 30% 30%
Expected dividend
yield 1% 1%
Fair value of 81p 74p
options/warrants
Expected volatility was determined by calculating the historical volatility
of the Group's share price from the date it listed to the grant date
of the share option. The expected life used in the model is based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The share options granted on the 21 November 2017 were in respect of
the acquisition of Comapi to the management team for retention and performance
post acquisition.
The share options granted on 19 December 2017 were following the approval
of the LTIP scheme at the AGM on 19 December 2017 and the end-to-end
awards that were granted to the Chief Executive Officer.
28. GROUP RECONCILIATION OF PROFIT BEFORE CORPORATION TAX TO CASH GENERATED
FROM OPERATIONS
Group Company
30.6.18 30.6.17 30.6.18 30.6.17
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Profit before tax from
all operations 9,243 8,091 5,055 (390)
Currency revaluation 20 (54) - -
Depreciation 2,614 2,038 - -
Gain/(loss) on disposal
of fixed assets 2 (58) - -
Share-based payments 450 162 450 162
Finance income (9) (15) - -
-------- -------- -------- --------
12,320 10,164 5,505 (228)
(Increase)/decrease in
trade receivables (4,794) (1,641) 3,528 2,469
Increase/(decrease) in
trade payables 5,603 290 1,876 33
-------- -------- -------- --------
Cash generated from operations 13,129 8,813 10,909 2,274
======== ======== ======== ========
29. GROUP CASH AND CASH EQUIVALENTS
The amounts disclosed in the statement of cash flow in respect
of cash and cash equivalents are in respect of these statements of
financial position amounts:
Group Company
GBP'000 GBP'000
As at 1 July 2016 17,313 639
======== ========
As at 30 June 2017 20,428 591
======== ========
As at 30 June 2018 15,005 646
======== ========
30. PROJECT DEVELOPMENT
During the period the Group incurred GBP4,376,645 (2017:
GBP2,243,687) in development investments. All resources utilised in
development have been capitalised as outlined in the accounting
policy governing this area.
31. POST BALANCE SHEET EVENTS
There are no post balance sheet events which impact the Group's
financial statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAPESFDKPFFF
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