Apologies if this point has been made elsewhere but I couldn't find any previous discussion on Stocko. I'm keen to get feedback if you think I'm not being fair or have overlooked something.

To me the revenue growth reported today in dotd's interims is nowhere near as impressive as it seems and neither is it 'organic' as claimed. By my analysis revenue is up only 9.9% - a long way short of the 22% reported.

In Nov 2017 Dotdigital acquired Comapi, an exclusively UK focussed SMS marketing tool with break even profitability achieved on £7.8m revenue.

However the acquisition didn't work out, and in May 2019 dotd announced it would 'discontinue' Comapi's 'non-core' revenues.

So far so good, although it was disappointing that dotd's long awaited second acquisition had gone the same way as its first (Netcallidus was also closed a couple of years after acquisition).

However things then started to get a little murky...... almost 2 years on from the announcement of closure, Comapi is still going strong, contributing £1.55m of 'discontinuing' revenue in today's interims (down from £4m last year). At the same time as Comapi's revenue has been winding down, the core dotd platform has experienced a series of much needed 'expectation beating', revenue upgrades driven by - you guessed it - low margin, UK focussed, SMS revenue.

Essentially dotd has acquired a chunk of low margin revenue, parked it in 'discontinuing operations' and is now gradually moving it back into 'continuing operations' thus giving the illusion of better than expected core revenue growth.

It's not just these interims that have been enhanced by this paper based movement of existing revenue - last year's finals reported growth of 12% when the actual figure was only 7%.

I hold dotd and I have made a good return over the years but a forward PE of 42 for a company growing at mid-single digits on deteriorating margins looks expensive to me especially when you throw in the track record of failed acquisitions and patchy success in expanding overseas.

Note, Stocko's figures for dotd exclude the Comapi 'discontinued' revenue.

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