REG - dotDigital Group plc - Final Results
16/11/2022 07:00
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RNS Number : 5442G dotDigital Group plc 16 November 2022
16 November 2022
Dotdigital Group plc
("Dotdigital" or the "Group")
Final Results for the year ended 30 June 2022
Growth in all regions with strong profits and cash generation
Dotdigital Group plc (AIM: DOTD), the leading 'SaaS' provider of an
omnichannel marketing automation and customer engagement platform, announces
its final audited results for the year ended 30 June 2022 ("FY22").
Financial Highlights
· Organic revenue growth of 8% to £62.8m (FY21: £58.1m)
o Recurring revenue increased to 94% (FY21: 93%)
o Monthly ARPC(1) increased 17% to £1,461 (FY21: £1,251 per month)
· Adjusted EBITDA(2) grew 10% to £21.7m (FY21: £19.8m)
· Adjusted operating profit(3) increased 6% to £14.5m (FY21: £13.7m)
· Adjusted basic earnings per share of 4.27p (FY21: 3.82p)
· Strong net cash balance at 30 June 2022 of £43.9m (FY21: £32m)
· Proposed final dividend of 0.98p per ordinary share (FY21: 0.86p) in
line with progressive dividend policy
Operational Highlights
· Growth across all global regions against exceptional prior year
· Digital marketing budgets continue to increase with focus on data and
actionable insights
· Deeper and broader partner engagement, with revenue through strategic
partner connectors up 14% to £28.9m (FY21: £25.4m)
· Email marketing remains core alongside growing omnichannel uptake,
with email volumes up 22% YOY
· Increased headcount and new management team in North America showing
early positive trends as well as strengthening the sales and customer success
teams in APAC
· Product innovation driving value with functionality recurring
revenue(4) up 18% to £22.3m (FY21: £18.9m)
· Customer data platform launched to enable our customers to aggregate
data from their business systems for relevancy and personalisation
· Board commitment to net zero emissions target by 2030
· Post period end appointment of Chairman and CFO adding management
bandwidth
Milan Patel, CEO of Dotdigital, commented:
"We are pleased to report a strong year of growth and profitability for
Dotdigital and significant operational enhancements, comparing well against a
strong prior year that was boosted by one-off pandemic related SMS revenue.
"The advancements we have made to our technology platform over the year
positions us at the heart of Marketeers' evolving needs, providing the tools
they require to drive broader, more targeted customer engagement. At the same
time, we believe we now have in place the right teams and infrastructure to
support our next stage of growth. Backed by high recurring revenues and strong
cash generation, we will continue our focused investment in the business to
grow our brand awareness through our partner networks, build our platform
offering in line with our technology vision and bolster our internal talent to
ensure we continue to scale across our territories.
"The positive trading momentum at the end of the period has continued into the
new financial year. With the challenges from the first half of the year
addressed together with favourable market drivers, the Group is tracking in
line with expectations for revenue growth and profitability marginally ahead.
"Whilst we are monitoring the impact of the wider economic climate across our
markets, our technology's proven ROI provides a compelling value proposition
to customers as they look to connect with their target audiences. This,
together with a clear growth strategy and strong balance sheet, gives us
confidence in our ability to continue to grow profitably."
Investor Video: A highlights video is available to watch here:
http://bit.ly/3tu7MX1 (http://bit.ly/3tu7MX1)
Investor Deck: A copy of the slides relating to the FY22 results is available
here: https://www.dotdigitalgroup.com/events-presentations/
(https://www.dotdigitalgroup.com/events-presentations/)
Investor Presentation: The management team will provide a live presentation
relating to the final results via the Investor Meet Company platform on
Friday, 18 November at 10.30am GMT. Investors can register
here: https://www.investormeetcompany.com/dotdigital-group-plc/register-investor
(https://www.investormeetcompany.com/dotdigital-group-plc/register-investor)
Annual Report: A copy of the Annual Report for FY22 will be available on our
website shortly: https://www.dotdigitalgroup.com/reports/
(https://www.dotdigitalgroup.com/reports/)
Notes
1. ARPC means Average Revenue Per Customer (including new customers
added in period and existing customers)
2. EBITDA is earnings before interest, tax, depreciation and
amortisation and adjusted for acquisition costs and share-based payments
3. Operating profit is adjusted for acquisition costs and share-based
payments
4. Functionality revenue refers to license fees and enhanced bolt-on
functionality
For further information please contact:
Dotdigital Group Plc Tel: 020 3953 3072
Milan Patel, CEO InvestorRelations@dotdigital.com
Alistair Gurney, CFO
Alma PR (Financial PR) Tel: 020 3405 0210
Hilary Buchanan dotdigital@almapr.co.uk
David Ison
Kieran Breheny
Canaccord Genuity (Nominated Advisor and Joint Broker) Tel: 020 7523 8000
Bobbie Hilliam
Jonathan Barr, Sales
finnCap (Joint Broker) Tel: 020 7220 0500
Jonny Franklin Adams, Corporate Finance
Alice Lane, ECM
Rhys Williams, Sales
Singer Capital Markets (Joint Broker) Tel: 020 7496 3000
Shaun Dobson, Chairman of Corporate Finance
Alex Bond, Corporate Finance
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE
INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE
REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
CHAIRMAN'S STATEMENT
I became Chairman of Dotdigital Group Plc post-year end on 5 July 2022,
replacing Mike O'Leary, who left the business due to health reasons. Mike
played an important role in helping the Company navigate the pandemic while
continuing to deliver against its strategic objectives and I would first like
to wish him all the best in his continued recovery.
A compelling opportunity
There were several reasons I took the role. Firstly, the product is
exceptional. The marketing automation technology the Group has developed is
among the most powerful and easy to use on the market, capable of delivering
outstanding returns on investment and significantly enhancing a brand's
reputation.
The second is the quality of the Group's growing customer base. International
in nature and comprising a diverse range of blue-chip organisations from
different sectors, marketeers at some of the world's biggest brands rely on
Dotdigital to power their campaigns.
Thirdly, the Group has an impeccable knowledge of the markets in which it
operates. Its teams understand the direction the digital marketing industry is
moving in; they understand the evolving needs of marketeers, they know how to
address them through the platform, and they recognise the steps we need to
take as a business to grow our competitive advantage.
Finally, the business has immense potential. The Group has firmly established
itself as one of the leading firms in the industry, but there is much more to
go for. Supported by a robust balance sheet, there are several routes to
accelerate growth available to us.
Ending the year on a high
To have successfully delivered a year of strong growth and profitability
despite the challenging circumstances is testament to the ability and hard
work of our teams, the resilience of our model, and the continuing demand for
our products.
The pandemic led to a temporary increase in demand for transactional SMS in
the prior year which tempered the year-on-year growth rate, our North American
operation was negatively impacted by an unusually competitive labour market in
the first half, and the Group was recruiting for a Chairman and Chief
Financial Officer (CFO) for much of the second.
I'm pleased to report that those challenges were overcome in the second half,
and positive momentum has continued into the new financial year. Crucially, we
now have management in place in North America and are having success in both
hiring and retaining colleagues in the region. While our teams there continue
to embed, the pipeline is building at a healthy rate.
We have also now filled the vacant roles on the Board, adding complementary
new skills and abilities and providing the bandwidth for management to return
to focusing solely on growing the business and creating shareholder value.
My priorities since joining
The first was to secure a new Chief Financial Officer with the right
credentials and ambitions that matched our own. A dynamic finance professional
with an impressive track record working in senior roles at private
equity-backed technology businesses, Alistair Gurney was the outstanding
candidate for the position, and I am delighted we were able to welcome him
onto the Board in September 2022.
The second priority was to work with the Board to sharpen the strategy. For
several years now, much of Dotdigital's R&D efforts have centred around
data functionality as demand for actionable insight in the market grows. As a
result, Dotdigital is now the platform of choice for thousands of marketeers
around the world looking to design and deliver advanced strategies with
personalisation at their core.
The next step is to build out our data capabilities further, ensuring we stay
ahead of the curve and granting access to new markets by offering one of the
most comprehensive customer data experience platforms (CDXP) available. Plans
are in place across our R&D teams to this end, and we are exploring
opportunities to accelerate the process through selective acquisitions of
adjacent technology. More information on our CDXP ambitions is provided in the
Chief Executive Officer's review in this report.
The third priority, in parallel with the first two, was to engage with the
Group and its marketplace and understand the culture of Dotdigital. Over the
past few months, I have met with many colleagues from across the Group. I have
been impressed by the calibre of talent at our disposal and encouraged by our
teams' enthusiasm for what we as a Group are trying to achieve.
Sustainable foundations
The Board continues to focus efforts on progressing the Group's Environmental,
Social and Governance (ESG) agenda. ESG is central to what we do and have made
significant progress on our initiatives in the year.
The Board is also aware that focussing on Dotdigital's own performance, as
well as the technology we provide to our customers, also has a beneficial
impact on both the people and our planet. As a business we prioritise our
people through wellbeing initiatives, meeting governance expectations through
our accreditation of ISO14001 and achieve high standards on data privacy and
data security through our accreditations and control systems of ISO27001 &
ISO27701.
We have a number of new initiatives underway, including a Board commitment to
a net zero emissions target by 2030. Further details of Dotdigital's
environmental initiatives and performance in 2022 are set out in the FY22
annual report.
Dividend
The Board has agreed to maintain a progressive dividend in line with Group
EBITDA growth. Therefore, subject to approval at the AGM in December 2022, the
Board proposes that the Group pay a final dividend of 0.98p per ordinary share
(2021: 0.86p), payable at the end of January 2023.
Looking ahead
We now have in place a strong Board with the right blend of skills and
experience, high quality management and support teams across our international
markets, a first-class product, growing pipelines, a clear strategy and the
financial firepower to accelerate delivery.
The economic backdrop remains uncertain but, as the pandemic demonstrated,
effective engagement with existing and prospective customers is just as
important to brands in more challenging times as it is in good, providing
Dotdigital a degree of insulation against recessionary pressures.
We know the direction we want to take the business and are focussed on using
our cash in the optimal way to capture the wealth of available opportunity. It
is early in my tenure, but I am excited about our prospects, and look forward
to keeping shareholders updated as we progress towards our goals.
John Conoley
Non-Executive Chairman
15 November 2022
CHIEF EXECUTIVE OFFICER'S REPORT AND FINANCIAL REVIEW
Overview - Year of profitable growth and operational enhancements
We are pleased to report a strong year of growth and profitability for
Dotdigital, along with significant operational enhancements. These results
represent a full financial year since the onset of the pandemic and, despite
challenges in the macro environment, compare well against a strong prior year
performance that was boosted by one-off pandemic- related SMS revenue. We have
cemented our relationships with our customers as a strategic partner, helping
them deliver a high return on investment from their digital marketing
strategies through a combination of best of breed functionality and services.
We have a differentiated and well-integrated offering, including leading
orchestration functionality at the heart of the platform, saving our customers
time. We have seen sustained business momentum through 2022 as a result of
continued execution against each pillar of the Group's growth strategy, namely
product innovation, geographic expansion and strategic partnerships, helping
us deliver Group organic growth of 8%.
During the year, while some form of normality is returning across the
different territories post COVID-related restrictions, we have continued to
see an acceleration in the shift towards Digital Marketing and the creation of
relevant and personalised experiences to audiences across all industries. The
use of data, platform adoption and automation capabilities are all continuing
to rise and, from a product development perspective, we continue to enhance
the Dotdigital platform to ensure it excels in these areas. By helping launch
targeted campaigns in our customers' advanced marketing strategies, ensuring
they have an individualised message at every touchpoint with their customer or
prospect and a strong return on investment, our product has cemented itself as
the platform of choice for both B2B and B2C marketeers.
A lot of progress has been made in the second half of the year rebuilding our
team in North America, with management now in place to lead the vision and
execution of growth in the region. We continue to see employee retention
strengthen and the successful recruitment of new talent as we embed our
culture in a hybrid working environment and competitors pause for breath in
their hiring efforts. Through these investments we are making the business
more scalable, which puts us in a good place to return to double digit organic
growth over the medium term.
We continue to see the increase in customers adopting an omnichannel approach,
with Email Marketing remaining core to their strategies for driving customer
acquisition and retention. We saw email volumes grow 20% in the period as
budgets continued to increase and verticals/industries started to return to
normal volumes post-pandemic.
As we look forwards, with our vision of building out our Customer Data
Experience Platform (CDXP), alongside our own research and development
efforts, we will look at acquisitions that offer added value and resilience to
our business model. This will not only allow us to expand our addressable
market with larger customers, but also makes our existing customers stickier.
Business Review - Marketing automation platform underpinned by rich customer
data
Dotdigital is focussed on empowering marketers to connect with customers
through its powerful automation platform that unifies all digital channels.
Our platform provides tools that enable marketing teams to launch highly
targeted, personalised and relevant campaigns to customers and prospects with
personalised engagement at every touchpoint - the right message, at the right
time, through the right channel to the right person. The result is faster and
more effective marketing campaigns with increased engagement and demonstrable
ROI.
The use cases of the Group's offering are wide and global, however the Group
remains focused on mid-market and enterprise clients across target verticals
including retail, non-profit, education, financial services, sports and travel
to name a few. The Group's foundations and particular strengths are in email
and deep integrations into strategic partners within e-commerce and CRM.
Results summary - Organic growth and cash generation
The Group generated revenues of £62.8m (2021: £58.1m). This 8% growth was
entirely organic, led by larger value customers, existing client growth and
improved customer retention in the EMEA region.
Adjusted EBITDA increased by 10% to £21.7m (2021: £19.8m) driven by the
contribution from organic growth and improving gross margin due to an increase
in email volumes which is a very high margin compared to lower margin channels
such as SMS. Statutory operating profit was £13.6 million (2021: £12.9 m)
including adjusting items of £8.1 million (2021: £6.9 m).
We have a strong track record of cash generation and this remains a high
priority for the Group with net cash increase of £11.6m in the period (2021:
£6.5m).
Market opportunity - Continued march toward digital and heightened focus on
personalisation
We operate within the large global Marketing Automation market, estimated to
be worth $5.5bn and growing at between 12% -13% year on year. This market
comprises three main target segments with technologies and business models
optimised accordingly. These segments consist of small/micro companies,
mid-market and enterprise. The mid-market and enterprise segments we are
primarily focussed on together estimated to be worth circa $3bn.
Our target verticals differ slightly depending on region and level of brand
awareness. In North America and APAC, where awareness of Dotdigital continues
to develop, we focus on e-commerce businesses through our strategic
partnerships and integrations. In the EMEA market, where our brand awareness
is high, we target all industry types. In what remains a fragmented market, we
offer a comprehensive functionality set and range of services to help
customers drive a higher ROI.
Digital transformation for marketeers continues at pace in a post-Covid world
which has adapted quickly to online experiences. Marketeers' strategies are
becoming more sophisticated with the use of data and actionable insights. The
Dotdigital platform is well placed to support this, making it easy for
customers to make use of data while providing drag and drop functionality to
automate messaging at all parts of the customer journey.
Email Marketing still generates the highest ROI from all Digital Marketing
campaigns and continues to be the marketeers' channel of choice, complemented
by other channels to form the overall experience. As the shift to digital
progresses, we continue to see an uptake of additional channels, such as push
and app messaging, aligned with our move towards building out omni-channel
capabilities through the acquisition of Comapi. According to eMarketer,
Digital Marketing as a percentage of overall Marketing continues to increase
and now represents 66%; as some of the traditional marketing budgets move into
Digital. We are well placed to capture this growth.
Growth strategy - Focussed execution against long-term vision
Having established a best-in-breed marketing automation platform with
omni-channel capability and global scale, we continue to see huge growth
potential with our core capabilities as the market moves toward
digitally-enabled marketing. At the same time, our financial strength,
combined with broad customer reach, provides us with the foundation and
resources to build our offering, both organically and through acquisition, in
line with our long term vision of building the most comprehensive CDXP
capabilities. CDXP describes the ecosystem by which companies and brands view
and seek to influence the customer journey - from connecting and communication
with customers and prospects, to retaining and optimising their purchasing
decisions. The tools that enable marketeers to have insight into the journey
is founded on rich customer data, which is where the Dotdigital Engagement
Cloud excels, and provides an opportunity to leverage through core capability
enhancements as well as new capabilities in this space.
Customer data sits at the core of everything we do, and there is substantial
scope to broaden our offering to provide even deeper engagement for our
customers across any channel through a unified source of customer
intelligence.
This vision is underpinned by our organic growth strategy, which continues to
be focussed around three core pillars: product innovation, geographic
expansion and strategic partnerships.
Product innovation
We are making good progress in growing the number of customers using enhanced
functionality, including an increasing number of data connectors through our
IPaaS (Infrastructure Platform as a Service) capabilities, while continuing to
enhance our customer data platform launched in the financial year to enable
our customers to aggregate data from their business systems for relevancy and
personalisation. We continue to educate the markets, through live sessions and
digital marketing content, on how to adopt new features to enhance messaging.
This helped drive an 18% increase in functionality recurring revenue from
product updates and enhancement, taken by both existing and new customers, to
£22.3m (2021: £18.9m).
The platform continues to go from strength to strength, delivering on the
needs of our customers and maintaining our competitive advantage.
Geographic expansion
We continued to successfully grow our presence in international market in the
period, in pursuit of our goal of diversifying revenues outside of the UK. The
Group saw revenue growth across all key global regions, despite the wider
effects of COVID-19, supply chain issues and a weakening economic backdrop.
In EMEA, revenues grew 8% to £48.2m (2021: £44.6m) helped by retention as we
strengthen relationships with our customers and deliver on their ROI metrics.
We have continued to see retention improve in the region as we strengthen
relationships with our customers and deliver on their ROI metrics. We have
also seen continued growth in spend from existing clients as they increase
their email message volumes, start to adopt an omnichannel approach and
continue to increase the use of our platform features.
Revenues from the Americas were up 3% to $12.9m (2021: $12.5m). Despite
headwinds faced in the first half of the financial year from recruitment
challenges, we made great progress in the second half. A new management team
has now been put in place to lead the execution of the strategy in the region
and we were able to step up our recruitment efforts in our go to market teams,
which are now embedded and are already starting to gain traction. We saw
strong customer wins in the fourth quarter of the financial year and that
momentum has continued into FY23.
The APAC market saw high levels of growth in the year, with revenues growing
18% to $9.1m (2021: $7.7m). We further increased Dotdigital's presence in
the region in the period through expanding our team in Singapore, which has
led to encouraging pipeline growth in Japan and the Far East.
Strategic partnerships
Revenues from customers using a data connector from one of our strategic
partners grew 14% to £28.9m in the year.
Enhanced brand awareness, alongside additional functionality and new
integrations into technology platforms, have allowed us to continue growth in
the Magento space. Our respective teams continue to work together on our joint
marketing strategy and enhanced development of our integration. During the
year we also became a premier partner of the Adobe Experience programme. In
the year, revenue from Magento customers grew 10% from £14.3m to £15.8m.
Our Shopify relationship continues to go from strength to strength. We have
seen an increasing pipeline resulting from the integration we have built with
Shopify Flow, which allows e-commerce merchants a seamless connection to
easily deploy campaigns from the Dotdigital platform. We continue to build
relationships with system integrators in the ecosystem. In the year, revenue
from Shopify customers grew 56% from £2.1m to £3.3m.
As BigCommerce's global partner, we continue to build on the brand awareness
within the user base and deepen our strategic relationship, formulating a
joint go to market plan and joint marketing efforts to the user base. We saw a
67% increase in revenue from BigCommerce-connected customers in the year to
£0.6m (from £0.4m in June 2021).
As part of our commitment to our B2B Marketing customers, we have continued to
enhance our integrations into both Microsoft Dynamics and Salesforce CRM as
well as building additional functionality specifically for B2B Marketing
tactics. Revenues from customers using our CRM connectors increased 7% to
£8.0m in the year, from £7.5m in the prior period.
We have recently launched our integration into a new strategic partnership
with Zendesk to further enhance Zendesk Sell, bringing the Marketing
Automation value proposition to its customer base. This will allow its
customers to store conversations that can be used to increase relevancy and
personalisation. Albeit early days, we continue to see a growing pipeline.
M&A
Together with our organic growth we intend to create value from acquisitions
to help build our position as a global market leader in the growing Marketing
Automation sector. We will look to invest in adjacent technology that
accelerates development of the platform's CDXP capabilities. This will allow
for average revenue per customer (ARPC) expansion within our existing global
customer base but also the ability to enter new addressable markets.
The key categories will remain around the three pillars to our acquisition
strategy:
· Adjacent technology to accelerate our CDXP capability;
· Consolidation of the market for talent and brand to expand
geographical coverage
· Specialist functionality for target verticals.
To drive value, we will integrate the core capabilities into the platform to
accelerate growth but also manage costs to increase margins and cash
generation.
Financial review
Business model
The Group generates most of its revenues from software and 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 platform features. The best value is available to those who take advantage
of additional functionality and integrations which help them leverage their
customer data. We also have a small amount of professional services revenue.
Revenues
The Group achieved revenue growth of 8% (2021: 23%) to £62.8m (£58.1m
2021). To achieve this against the backdrop of 2021 in which, we enjoyed
significant revenue from one off COVID-19 related messaging volumes, is
testament to the Group's focus on contracted SaaS revenues, which grew by 10%
to £49.6m in 2022. Total recurring revenues including contracted messaging
plans now comprise 94% of total revenue.
Total recurring revenue has grown with a compound annual growth rate (CAGR) of
17% since 2018, this is driven by our functional recurring revenues which have
grown at 26% over the same 4 year period.
International revenues remained at 31% of the Group total.
Gross margin
The gross margin for the period remained at 82%. Whilst the gross margin for
email and standard channels remained above 90%, this is always diluted by SMS
and professional services, which each have a higher marginal cost of sale. We
continue our focus on high margin growth as opposed to driving revenue
irrespective of quality.
Operating expenses
Adjusted operating profit from continuing operations grew by 6% from £13.7m
to £14.5m as we continued to invest in people in the areas of development,
sales and marketing, particularly within the high-growth regional offices, to
continue enhancing and adding to the product suite.
Balance sheet
There was strong cash management in the year with net cash generated from
continuing operations of £23.4m (2021: £20.7m). The cash balance at the end
of the period was £43.9m (2021: £32.0m). 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 other automated payment collection methods helped with
the year-end position.
Trade receivables have reduced by 3% in the year reflecting focussed cash
management. Overall receivables have reduced by 1%.
The Group continues to invest heavily in the platform to increase
functionality around marketing automation, increasing the number of messaging
channels and surfacing data and providing insights for our customers to
provide excellent customer engagement. This continued investment is
demonstrated by the increase in product development to £7.6m (2021: £6.8m).
Tax
Profitability from continuing operations continues to grow. This is reflected
within the tax charge, which is now £1.2m with an effective tax rate of 9%,
with a lower than standard rate due to enhanced R&D tax credits.
EPS
In the year the adjusted basic EPS increased to 4.27p (2021: 3.82p) and
adjusted diluted EPS increased to 4.18p (2021: 3.76p), despite the higher
effective tax rate of 9%, (2021: 8%). Basic EPS also increased to 3.96p (2021:
3.55p)
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 Group EBITDA growth. Therefore, subject to
approval at the AGM in December 2022, the Board proposes that the Group will
pay a final dividend of 0.98 pence per ordinary share (2021: 0.86p), to be
payable at the end of January 2023.
People - The lifeblood of Dotdigital
John Conoley joined us as Non-Executive Chairman and Board member on 5 July
2022. John brings significant public company experience to the Board as well
as industry experience following extensive career spanning various roles
within the technology sector. John has established a track record in growing
businesses and delivering value creation.
Alistair Gurney also joined us as Chief Financial Officer and Board member on
19 September 2022. Alistair brings significant experience from private equity
backed technology business, M&A and in areas such as financial planning
and analysis.
Through the period we continued investing in management across all regions as
well as in Product Engineering, Sales, Customer Success, and Marketing to
bring new experiences and build scale within the teams.
Environmental, Social and Governance (ESG) - Our sustainable foundations
We report on our Scope 1, 2 and 3 Greenhouse Gas (GHG) emission and there was
an increase in the period of gross CO2e by 27% as travel came back post covid
lockdowns and return to some normalisation to events and face to face
meetings. We are incredibly proud that we have offset our CO2 emission by
carbon offsetting to be Carbon neutral through the period. We have also
continued to adhere to the standard on ISO14001 Environmental Management
systems and continue to support the Terra carta on environmental matters.
Current trading and outlook
The advancements we have made to our technology platform over the year
positions us at the heart of Marketeers' evolving needs, providing the tools
they require to drive broader, more targeted customer engagement. At the same
time, we believe we now have in place the right teams and infrastructure to
support our next stage of growth. Backed by high recurring revenues and strong
cash generation, we will continue our focused investment in the business to
grow our brand awareness through our partner networks, build our platform
offering in line with our technology vision and bolster our internal talent to
ensure we continue to scale across our territories.
The positive trading momentum at the end of the period has continued into the
new financial year. With the challenges from the first half of the year
addressed together with favourable market drivers, the Group is tracking in
line with expectations for revenue growth and profitability marginally ahead.
Whilst we are monitoring the impact of the wider economic climate across our
markets, our technology's proven ROI provides a compelling value proposition
to customers as they look to connect with their target audiences. This,
together with a clear growth strategy and strong balance sheet, gives us
confidence in our ability to continue to grow profitably.
Milan
Patel
Chief Executive
Officer
15 November
2022
Alistair Gurney
Chief Financial Officer
15 November 2022
DOTDIGITAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2022
30.6.22 30.6.21
£'000 £'000
Notes
CONTINUING OPERATIONS
Revenue from contracts with customers 62,832 58,124
Cost of sales 7 (11,570) (10,356)
Gross profit 51,262 47,768
Administrative expenses 7 (36,726) (34,089)
OPERATING PROFIT FROM CONTINUING OPERATIONS PRE SHARE-BASED PAYMENTS AND 14,536 13,679
EXCEPTIONAL COSTS
Share based payments 28 (456) (625)
Exceptional costs 5 (475) (188)
OPERATING PROFIT FROM CONTINUING OPERATIONS 13,605 12,866
Finance costs 6 (57) (74)
Finance income 6 57 20
PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS 13,605 12,812
7
Income tax expense 8 (1,774) (1,322)
Profit for the year from continuing operations 11,831 11,490
Loss for the year from discontinuing operations 12 - (899)
Profit for the year attributable to the owners of the parent 11,831 10,591
Earnings per share from all operations (pence per share)
Basic 11 3.96 3.55
Diluted 11 3.88 3.50
Adjusted Basic 11 4.27 3.82
Adjusted Diluted 11 4.18 3.76
Earnings per share from continuing operations (pence per share)
Basic 11 3.96 3.85
Diluted 11 3.88 3.79
Adjusted Basic 11 4.27 4.12
Adjusted Diluted 11 4.18 4.06
Earnings per share from discontinued operations (pence per share)
Basic 11 (0.00) (0.30)
Diluted 11 (0.00) (0.30)
Adjusted Basic 11 (0.00) (0.30)
Adjusted Diluted 11 (0.00) (0.30)
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
30.6.22 30.6.21
£'000 £'000
PROFIT FOR THE YEAR 11,831 10,591
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations 333 (87)
Total comprehensive income attributable to:
Owners of the parent 12,164 10,504
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Comprehensive income from continuing operations 12,164 11,403
Comprehensive loss from discontinued operations - (899)
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2022
30.6.22 30.6.21
£'000 £'000
Notes
ASSETS
NON-CURRENT ASSETS
Goodwill 13 9,680 9,680
Intangible assets 14 17,698 16,134
Property, plant and equipment 15 3,285 3,972
30,663 29,786
CURRENT ASSETS
Trade and other receivables 17 13,211 13,350
Cash and cash equivalents 18 43,919 31,951
57,130 45,301
TOTAL ASSETS 87,793 75,087
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital 19 1,496 1,494
Share premium 20 7,124 7,124
Reverse acquisition reserve 20 (4,695) (4,695)
Other reserves 20 2,005 3,066
Retranslation reserve 20 296 (37)
Retained earnings 20 63,582 54,081
TOTAL EQUITY 69,808 61,033
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities 22 1,758 2,489
Deferred tax 24 2,755 1,207
4,513 3,696
CURRENT LIABILITIES
Trade and other payables 21 12,654 9,334
Financial liabilities:
Interest bearing loans and borrowings - -
Lease liabilities 22 818 934
Current tax payable - 90
13,472 10,358
TOTAL LIABILITIES 17,985 14,054
TOTAL EQUITY AND LIABILITIES 87,793 75,087
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF FINANCIAL POSITION
30 JUNE 2022
30.6.22 30.6.21
£'000 £'000
Notes
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 7 4
Investments 16 18,362 18,141
18,369 18,145
CURRENT ASSETS
Trade and other receivables 17 1,545 140
Cash and cash equivalents 18 163 85
1,708 225
TOTAL ASSETS 20,077 18,370
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital 19 1,496 1,494
Share premium 20 7,124 7,124
Other reserves 20 1,915 1,690
Retained earnings 20 9,400 7,570
TOTAL EQUITY 19,935 17,878
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 21 142 492
TOTAL LIABILITIES 142 492
TOTAL EQUITY AND LIABILITIES 20,077 18,370
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Called up share
Retained Share
capital earnings premium
£'000 £'000 £'000
Balance as at 1 July 2020 1,493 45,655 6,967
Transactions with owners
Issue of share capital 1 - 157
Dividends - (2,472) -
Transfer in reserves - 307 -
Deferred tax on share options - - -
Share-based payments - - -
Transactions with owners (restated) 1 (2,165) 157
Total comprehensive income
Profit for the year - 10,591 -
Other comprehensive income - - -
Total comprehensive income - 10,591 -
Restated balance as at 30 June 2021 1,494 54,081 7,124
Balance as at 1 July 2021 1,494 54,081 7,124
Issue of share capital 2 - -
Dividends - (2,564) -
Transfer in reserves - 234 -
Deferred tax on share options - - -
Share-based payments - - -
Transactions with owners 2 (2,330) -
Profit for the year - 11,831 -
Other comprehensive income - - -
Total comprehensive income - 11,831 -
Balance as at 30 June 2022 1,496 63,582 7,124
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
CONTINUED…
Retranslation Reverse acquisition Other Total equity
reserve reserve reserves
£'000 £'000 £'000 £'000
Balance as at 1 July 2020 50 (4,695) 1,600 51,070
Transactions with owners
Issue of share capital - - - 158
Dividends - - - (2,472)
Transfer in reserves - - (307) -
Deferred tax on share options - - 1,148 1,148
Share-based payments - - 625 625
Transactions with owners - - 1,466 (541)
Total comprehensive income
Profit for the year - - - 10,591
Other comprehensive income (87) - - (87)
Total comprehensive income (87) - - 10,504
Balance as at 30 June 2021 (37) (4,695) 3,066 61,033
Balance as at 1 July 2021
Issue of share capital - - - 2
Dividends - - - (2,564)
Transfer in reserves - - (234) -
Deferred tax on share options - - (1,283) (1,283)
Share-based payments - - 456 456
Transactions with owners - - (1,061) (3,389)
Profit for the year - - - 11,831
Other comprehensive income 333 - - 333
Total comprehensive income 333 - - 12,164
Balance as at 30 June 2022 296 (4,695) 2,005 69,808
· 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 UK Adopted
International Accounting Standards.
· Other reserves relate to the charge for the share-based
payment in accordance with IFRS 2and the transfer on the exercise or lapsing
of share options.
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Called up share
Retained Share Other
capital earnings premium Reserves Total equity
£'000 £'000 £'000 £'000 £'000
Balance as at 1 July 2020 1,493 5,924 6,967 1,372 15,756
Transactions with owners
Issue of share capital 1 - 157 - 158
Dividends - (2,472) - - (2,472)
Transfer in reserves - 307 - - 307
Share based payments - - - 318 318
Transactions with owners 1 (2,165)
157 318 (1,689)
Total comprehensive income
Profit for the year - 3,811 - - 3,811
Total comprehensive income (restated)
- 3,811 - - 3,811
Balance as at 30 June 2021
1,494 7,570 7,124 1,690 17,878
Balance as at 1 July 2021 1,494 7,570 7,124 1,690 17,878
Issue of share capital 2 - - - 2
Dividends - (2,564) - - (2,564)
Transfer in reserves - 231 - (231) -
Share based payments - - - 456 456
Transactions with owners 2 (2,333) - 225 (2,106)
Profit for the year - 4,163 - - 4,163
Total comprehensive income - 4,163 - - 4,163
Balance as at 30 June 2022 1,496 9,400 7,124 1,915 19,935
· 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 IFRS 2 and the transfer on the exercise or lapsing of share
options.
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
30.6.22 30.6.21
£'000 £'000
Notes
Cash flows from operating activities
Cash generated from operations 29 25,162 17,969
Tax paid (1,761) (975)
Net cash generated from all operating activities 23,401 16,994
Net cash generated from continuing operating activities 23,401 20,710
Net cash used in discontinued operating activities - (3,716)
Cash flows from investing activities
Purchase of intangible fixed assets 14 (7,686) (6,870)
Purchase of property, plant and equipment 15 (465) (169)
Proceeds from sale of property, plant and equipment - 2
Interest received 57 20
Net cash flows used in investing activities (8,094) (7,017)
Net cash used in from continuing investing activities (8,094) (7,017)
Net cash used in discontinued investing activities - -
Cash flows from financing activities
Equity dividends paid (2,564) (2,472)
Payment of lease liabilities (1,110) (1,182)
Proceeds from share issues 2 158
Net cash flows used in financing activities (3,672) (3,496)
(3,672) (3,446)
Net cash used in continuing financing activities
Net cash used in discontinued financing activities - (50)
11,635 6,481
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year 30 31,951 25,383
Effect of foreign exchange rate changes 333 87
Cash and cash equivalents at end of year 30 43,919 31,951
.
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
30.6.22 30.6.21
£'000 £'000
Notes
Cash flows from operating activities
Cash generated from operations 29 2,645 2,006
2,645 2,006
Net cash generated from operating activities
Cash used in investing activities
Purchase of property, plant and equipment (5) (3)
Net cash flows used in investing activities (5) (3)
Cash flows used in financing activates
Equity dividends paid (2,564) (2,472)
Proceeds from share issues 2 158
Net cash flows used in financing activities (2,562) (2,314)
Increase in cash and cash equivalents 78 (311)
Cash and cash equivalents at beginning of year 30 85 396
Cash and cash equivalents at end of year 30 163 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
1. GENERAL INFORMATION
Dotdigital Group Plc ("Dotdigital") is a public limited 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 below.
2.ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the UK (IFRSs as adopted by the
UK) 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 Accounting Standards Board and the IFRS Interpretations
Committee effective at the time of preparing the consolidated financial
statements.
New and amended standards adopted by the Company
The Company adopted the following new and amended relevant IFRS in the year:
IFRS 7 Financial Instruments: Disclosures - amendments regarding replacement issues
in the context of the IBOR reform
IFRS 9 Financial Instruments - Amendments regarding replacement issues in the context
of the IBOR reform
IFRS 9 Financial Instruments - Amendments resulting from Annual Improvements to IFRS
Standards 2018-2020 (fees in the "10 per cent" test for derecognition of
financial liabilities)
IAS 37 Provisions, Contingent Liabilities and Contingent Assets - Amendments
regarding the costs to include when assessing whether a contract is onerous
IFRS 16 Leases - Amendments regarding COVID-19 related rent concessions
The adoption of these accounting standards did not have any effect on the
Company's Statement of Comprehensive Income, Statement of Financial Position
or equity.
Accounting standards issued but not yet effective
The International Accounting Standards Board ("IASB") has issued/revised a
number of relevant standards with an effective date after the date of these
financial statements. Any standards that are not deemed relevant to the
operations of the Company have been excluded. The Directors have chosen not
to early adopt these standards and interpretations and they do not anticipate
that they would have a material impact on the Company's financial statements
in the period of initial application.
Effective date
IAS 1 Presentation of Financial Statements - amendments regarding the classification 1 January 2023
of liabilities
IAS 1 Presentation of Financial Statements - amendments regarding the disclosure of
accounting policies
1 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates - amendments regarding
the definition of accounting estimates
1 January 2023
IAS 12 Income Taxes - amendments regarding deferred tax related to assets and
liabilities arising from a single transaction
1 January 2023
IFRS 16 Leases - amendments regarding the classification of liabilities 1 January 2024
The financial statements are presented in sterling (£), rounded to the
nearest thousand pounds.
Significant accounting policies
The Group has consistently applied the following accounting policies to all
periods presented in these consolidated financial statements, except if
mentioned otherwise.
Basis of consolidation
In the period ended 2009, the Company acquired via a share for share exchange
the entire issued share capital of Dotdigital EMEA 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 Dotdigital EMEA 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, Dotdigital EMEA Limited. The
following accounting treatment has been applied in respect of the reverse
acquisition:
- the assets and liabilities of the legal subsidiary, Dotdigital EMEA 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
Dotdigital EMEA 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 and;
- 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 and;
- 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 Dotdigital EMEA Limited.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable
for the sale of 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.
All revenue is from contracts signed with new customers and upgrades and
additional functional recurring revenue sold to existing contracted clients.
Revenue from contracts is 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.
Professional services at no charge: The Group sells professional services to
its customers and there are occasions when these services are provided at no
cost as part of the contract sold. The services provided for no charge are
recognised at the price stated within the latest price list and accounted for
as separate performance obligations when the service occurs. The amount
allocated to the services is deducted from the contract value and the
remainder of the contract value is spread evenly over the term of the
contract.
Prepaid contracts: The Group sells 12-, 24- and 36-month contracts to its
customers. This revenue is recognised monthly over the period of the contract.
Where a customer prepays their contract, this is recognised over the period of
the contract irrespective of materiality.
Term contract billing: The Group raises the first invoice to its new customers
when the service agreement is signed. Occasionally, the service does not start
in the same month as when the service agreement is signed but is invoiced in
the month where the service agreement is signed. The revenue is then
recognised over the period of the contract irrespective of materiality.
Going concern
The Directors are required to satisfy themselves that it is reasonable for
them to conclude whether it is appropriate to prepare the financial statements
on a going concern basis, and as part of that process they have followed the
Financial Reporting Council's guidelines ("Guidance on the Going Concern Basis
of Accounting and Reporting on Solvency and Liquidity Risk" issued April
2016).
The Group's business activities together with factors that are likely to
affect its future development and position are set out in the Chairman's
report, the Chief Executive Officer's report and financial review and the
Directors' report. Budgets and detailed profit and loss forecasts that look
beyond twelve months from the date of these consolidated financial statements
have been prepared and used to ensure that the Group can meet its liabilities
as they fall due.
The Directors have made various assumptions in preparing these forecasts,
using their view of both the current and future economic conditions that may
impact on the Group during the forecast period. The Directors have also
considered the continued impact of the COVID-19 pandemic and the impact of the
measures taken to contain it, on the Group. Due to the nature of the Group's
activities, there has not been a significant on-going impact on the business
(as detailed in the Chief Executive Officer's Review and Risk section).
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.
Operating profit
Operating profit is stated after charging operating expenses but before
finance costs and finance income.
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 CGUs.
- 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 as detailed in IAS 38 'Intangible Assets' 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 asset;
- 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
three 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 over the lifetime of the customer contract.
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.
Right of use assets: over the term of the lease
Short leaseholds: 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 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.
Leases
Leases are recognised as a right-of-use asset and a corresponding liability at
the date at which the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and finance cost. The finance
cost is charged to the income statement over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use asset is depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
- fixed payments (including in-substance fixed payments), less any
lease incentives receivable;
- variable lease payment that are based on an index or a rate;
- amounts expected to be payable by the lessee under residual
value guarantees;
- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and;
- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the lessee's incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability;
- any lease payments made at or before the commencement date less
any lease incentives received;
- any initial direct costs; and
- restoration costs.
Payments associated with short-term leases and leases of low-value assets are
recognised on a straight-line basis as an expense in the income statement.
Short-term leases are leases with a lease term of 12 months or less. Low-value
assets, being less than £5,000, comprise IT equipment and small items of
office furniture.
Extension and termination options
Extension and termination options are included in a number of property and
equipment leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. The majority of
extension and termination options held are exercisable only by the Group and
not by the respective lessor. None of the total lease payments made in the
period to 30 June 2022 were optional.
In determining the lease term, management considers all facts and
circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods
after termination options) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated). Potential future cash
outflows have not been included in the lease liability because it is not
reasonably certain that the leases will be extended (or not terminated), the
amount of these cash flows is uncertain as several rounds of rent reviews are
due before this extension date.
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, and loans and
receivables. The classification depends on the nature and purpose of the
financial assets and is determined at the time of recognition.
Financial assets are classified into the following specified categories:
financial assets at FVPL, 'amortised cost' or 'fair value through other
comprehensive income' ('FVOCI'). The classification depends on the nature and
purpose of the financial assets and is determined at the time of recognition.
Financial assets are assessed for indicators of impairment at each balance
sheet date. Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the
investment have been impacted.
For certain categories of financial asset, such as trade receivables, assets
that are assessed not to be impaired individually, the Group recognises
lifetime expected credit losses ('ECL') when there has been a significant
increase in credit risk since initial recognition. However, if the credit risk
on the financial instrument has not increased significantly since initial
recognition, the Group measures the loss allowance for that financial
instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all
possible default events over the expected life of a financial instrument. In
contrast, 12-month ECL represents the portion of lifetime ECL that is expected
to result from default events on a financial instrument that are possible
within 12 months after the reporting date.
On derecognition of a financial asset measured at amortised cost, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
- 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, accrued liabilities
and lease 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 financial position of all the Group entities (none of which
has the currency of a hyper-inflationary 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'.
The retranslation reserve represents the cumulative exchange differences on
the retranslation of foreign subsidiaries into the functional currency.
Other reserves relate to the charge for share-based payments in accordance
with IFRS 2 'Share-based Payments' plus the movement on the exercise or
lapsing of share options.
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 (£) 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.
Foreign currency exchange rate risk
The Group has certain investments in foreign operations, whose net assets are
exposed to foreign currency translation risk. As well as naturally mitigating
this risk by offsetting its cost base in the same currencies where possible,
currency exposure arising from the net assets of the Group's foreign
operations is managed through cash balances denominated in the relevant
foreign currencies.
The Group is mainly exposed to the US Dollar, Australian Dollar, Singaporean
Dollar, Euro, Belarusian Ruble, South African Rand, Polish Zloty and Canadian
Dollar currencies.
The table below details the Group's sensitivity to a 10% increase or decrease
in Sterling against the relevant foreign currencies. 10% is the sensitivity
rate which represents management's assessment of the reasonable possible
change in foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their
translation at the period end of a 10% change in foreign currency rates. A
positive number below indicates an increase in profit where Sterling
strengthens 10% against the relevant currency. For a 10% weakening of Sterling
against the relevant currency, there would be an equal and opposite impact on
the profit and other equity, and the balances below would be negative or
positive.
30.6.22 30.6.21
£'000 £'000
US Dollar 60 60
Australian Dollar 14 13
Singaporean Dollar (37) (9)
Euro 10 (20)
Belarusian Ruble (2) 7
South African Rand (2) 4
Polish Zloty 5 95
Canadian Dollar 1 (1)
49 149
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 - refer to note 14
Our business model is underpinned by our email and data-driven omnichannel
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 consider that 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 goodwill - refer to note 13
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.
(c) Going concern of Australian entity - refer to note 2: Going concern
Management review each of the trading entities operations, particularly when
it is loss making to ascertain if it is a going concern and if its assets
should be impaired.
Judgement is therefore required to review future looking forecasts and review
existing and future sales pipeline within the region. Thereby leading to a
decision as to whether the region remains viable.
Estimates and assumptions
(a) 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 19.75% (2021:
6.2%). This has increased as a result of the increase in the cost equity which
was impacted by both the decline in the share price at the year end compared
to last year and the increase in dividend growth rate. 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 13 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 28 to the financial statements. The charge
made to income statement for period is also disclosed there.
(c) Depreciation and
amortisation
The Group depreciates right of use assets, short leasehold, fixtures and
fittings, computer equipment and amortises customer relationships, technology,
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 right of use
assets, short leasehold, fixtures and fittings, computer equipment, customer
relationships, technology, 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.
Where a general provision is set then specific rationale will be set against
this which will be a combination of looking at historical data to ascertain
the percentage of debt which goes bad. Plus set against debts within a
specific business sector which might be facing financial difficulty, thereby
leading to a deemed higher risk of defaulting on their debts.
(e) Lease accounting - incremental borrowing rate
IFRS 16 "Leases" requires lease payments to be discounted using the lessee's
incremental borrowing rate. The Group's incremental borrowing rate, as at the
date of adoption of IFRS 16, has been based on local commercial bank loans.
Management have taken the view that specific costs of borrowing should be
applied to each lease as this reflects the different economic conditions
within each geography and hence is more representative of the funding
facilities available in those countries.
Exceptional items
Where items of income and expense are of such size, nature or incidence that
their disclosure is relevant to explain the performance of the company for the
period, the nature and amount of such items should be disclosed separately.
3. SEGMENTAL REPORTING
In the current year, Dotdigital's single line of business remains the
provision of data-driven omni-channel marketing automation. In the previous
year Dotdigital had two lines of business; the additional line being
communication platform as a service (CPaaS). The chief operating decision
maker considers the Group's segments to be by geographical location, this
being EMEA, US and APAC operations and by business activity, this being core
Engagement Cloud and CPaaS as shown in the tables that follow:
Geographical revenue and results (from all operations)
30.6.2022
EMEA US APAC Total
£'000 £'000 £'000 £'000
Income statement
Revenue 48,191 9,688 4,953 62,832
Gross profit 38,374 8,537 4,351 51,262
Profit/(loss) before income tax 12,444 972 189 13,605
Total comprehensive income attributable to the owners of the parent
10,967 1,049 148 12,164
Financial position
Total assets 83,664 3,498 631 87,793
Net current assets/(liabilities) 42,270 2,204 (816) 43,658
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% of revenue (2021: none).
All revenue is from contracts signed with new customers and upgrades and
additional functional recurring revenue sold to existing contracted clients.
Revenue from contracts is 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.
30.6.2021
EMEA US APAC Total
£'000 £'000 £'000 £'000
Income statement
Revenue 47,024 9,264 4,262 60,550
Gross profit 36,878 8,241 3,864 48,983
Profit/(loss) before income tax 11,669 609 (294) 12,014
Total comprehensive income attributable to the owners of the parent
10,436 379 (311) 10,504
Financial position
Total assets 71,566 3,098 423 75,087
Net current assets/(liabilities) 33,942 1,387 (386) 34,943
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% of revenue (2021: none).
All revenue is from contracts signed with new customers and upgrades and
additional functional recurring revenue sold to existing contracted clients.
Revenue from contracts is 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.
Segmental reporting
Business activity revenue and results
30.6.2022
Core CPaaS Total
£'000 £'000 £'000
Income statement
Revenue 62,832 - 62,832
Gross profit 51,262 - 51,262
Profit/(loss) before income tax 13,655 (50) 13,605
Total comprehensive income attributable to the owners of the parent
12,214 (50) 12,164
Financial position
Total assets 87,774 19 87,793
Net current assets/(liabilities) 43,640 18 43,658
30.6.2021
Core CPaaS Total
£'000 £'000 £'000
Income statement
Revenue 58,124 2,426 60,550
Gross profit 47,768 1,215 48,983
Profit/(loss) before income tax 12,812 (798) 12,014
Total comprehensive income attributable to the owners of the parent
11,403 (899) 10,504
Financial position
Total assets 74,976 111 75,087
Net current assets/(liabilities) 34,974 (31) 34,943
4. EMPLOYEES AND DIRECTORS
30.6.22 30.6.21
£'000 £'000
Wages and salaries 24,650 22,005
Social security costs 2,396 2,228
Other pension costs 561 534
27,609 24,767
The average monthly number of employees during the year is as follows
30.6.22 30.6.21
Directors 5 5
Sales and marketing product 157 160
Development and system engineers 117 105
Administration 69 69
348 339
Included in the total employees cost above, £6,194,834 (2021: £5,198,785)
was capitalised in relation to internally generated development costs.
5. EXCEPTIONAL COSTS
Continuing exceptional costs incurred in the year relate to the amortisation
of acquired intangibles of £120,000 (2021: £120,000), senior management
settlement costs of £355,053 (2021:£nil) and the acquisition costs of Comapi
of £nil (2021: £68,095).
6. NET FINANCE INCOME
30.6.22 30.6.21
£'000 £'000
Finance income:
Deposit account interest 57 20
Finance cost:
Finance lease interest (57) (74)
- (54)
7. OPERATING PROFIT
Costs by nature
Profit from continuing operations has been arrived at after charge and
crediting:-
30.6.22 30.6.21
£'000 £'000
Outsourcing and tech infrastructure 11,570 10,356
Total cost of sales 11,570 10,356
30.6.22 30.6.21
£'000 £'000
Direct marketing 3,066 2,976
Partner commission 2,125 2,198
Staff related costs (inc Directors' emoluments) 20,290 19,208
Auditor's remuneration 81 52
Amortisation of intangibles* 6,001 4,675
Depreciation charge* 1,080 1,410
Legal, professional and consultancy fees 1,028 848
Computer expenditure 802 538
Bad debts 682 897
Foreign exchange losses/(gains) (452) 543
Travel and subsistence costs 119 87
Office running 413 388
Gain on disposal of property, plant and equipment - (2)
Staff welfare 432 342
Other costs 1,059 549
Management charge - (620)
Total administrative expenses 36,726 34,089
During the year the Group obtained the following services from the Group's
auditor at costs detailed below:
30.6.22 30.6.21
£'000 £'000
Fees payable to the Company's auditor for the audit of Parent Company and 33 28
consolidated financial statements
Fees payable to the Company's auditor for other services
- audit of Company subsidiaries 45 47
- review of interim accounts 3 5
81 80
*Both amortisation of intangibles and depreciation charge will not agree to
the relevant notes as these numbers exclude amounts capitalised as development
expenditure, amounts included in exceptional costs and amounts in cost of
sales.
8. INCOME TAX EXPENSE
Analysis of the tax charge from continuing operations:
30.6.22 30.6.21
£'000 £'000
Current tax on profits for the year 1,180 1,008
Changes in estimates related to prior years 142 (53)
Deferred tax on origination and reversal of timing differences 452 367
1,774 1,322
Analysis of the tax charge from discontinuing operations:
30.6.22 30.6.21
£'000 £'000
Current tax on profits for the year - -
Deferred tax on origination and reversal of timing differences - 101
- 101
Factors affecting the tax charge:
30.6.22 30.6.21
£'000 £'000
Profit on ordinary activities from all operations before tax 13,605 12,014
Profit on ordinary activities multiplied by the average rate of corporation 2,585 2,283
tax suffered globally: 19% (2021: 19%)
Effects of:
Adjustments in respect of prior years 142 (102)
Expenses not deductible 98 673
Research and development enhanced claim (1,439) (1,266)
Income not taxable (21) (505)
Share options 71 11
Tax rate changes 291 375
Effects of overseas tax rates 38 (36)
Other 9 (10)
Total tax charge for the year 1,774 1,423
Deferred tax was calculated using the rate 25% (2021: 25%). For further
details on deferred tax see note 24.
Taxation for each region is calculated at the rates prevailing in the
respective jurisdiction.
The main rate of UK corporation tax in the period was 19% (2021: 19%). Finance
Act 2021 makes provision for the rate of corporation tax in the UK to increase
(from 1 April 2023) from 19% to 25%. UK deferred balances have therefore been
recognised at 25% in the period (2021: 25%).
9. PROFIT OF PARENT COMPANY
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 £4,163,416 (2021: £3,879,692)
10. DIVIDENDS
Amounts recognised as distributions to equity holders in the period
30.6.22 30.6.21
£'000 £'000
Paid dividend for year end 30 June 2021 of 0.86p (2020: 0.83p) per share 2,564 2,472
Proposed dividend for the year end 30 June 2022 of 0.98p (2021: 0.86p) per 2,925 2,583
share
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:
30.6.22 30.6.21
From all operations £'000 £'000
Profit for the year attributable to the owners of the parent 11,831 10,591
Amortisation of acquisition-related intangible fixed assets (see note 14) 120 120
Other exceptional costs (see note 5) 355 68
Share-based payment (see note 28) 456 625
Adjusted profit for the year attributable to the owners of the parent 12,762 11,404
Management does not consider the above adjustments to reflect the underlying
business performance. The other exceptional costs relate to senior management
settlement costs.
30.6.22 30.6.21
£'000 £'000
Adjusted profit for the year attributable to the owners of the parent for 12,762 12,303
continuing activities.
Adjusted loss for the year attributable to the owners of the parent for - (899)
discontinuing activities.
Adjusted profit for the year attributable to the owners of the parent 12,762 11,404
30.6.22
Weighted
average Per share
From all operations Earnings number of Amount
£'000 shares Pence
Basic EPS
Profit for the year attributable to the owners of the parent 11,831 298,995,582 3.96
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent 12,762 298,995,582 4.27
Options and warrants - 6,222,724 -
Diluted EPS
Profit for the year attributable to the owners of the parent 11,831 305,218,306 3.88
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent 12,762 305,218,306 4.18
30.6.22
Weighted
average Per share
From continuing operations Earnings number of Amount
£'000 shares Pence
Basic EPS
Profit for the year attributable to the owners of the parent 11,831 298,995,582 3.96
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent 12,762 298,995,582 4.27
Options and Warrants - 6,222,724 -
Diluted EPS
Profit for the year attributable to the owners of the parent 11,831 305,218,306 3.88
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent 12,762 305,218,306 4.18
30.6.21
Weighted
average Per share
From all operations Earnings number of Amount
£'000 shares Pence
Basic EPS
Profit for the year attributable to the owners of the parent 10,591 298,598,459 3.55
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent 11,404 298,598,459 3.82
Options and Warrants - 4,322,868 -
Diluted EPS
Profit for the year attributable to the owners of the parent 10,591 302,921,327 3.50
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent 11,404 302,921,327 3.76
30.6.21
Weighted
average Per share
From continuing operations Earnings number of Amount
£'000 shares Pence
Basic EPS
Profit for the year attributable to the owners of the parent 11,490 298,598,459 3.85
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent 12,303 298,598,459 4.12
Options and warrants - 4,322,868 -
Diluted EPS
Profit for the year attributable to the owners of the parent 11,490 302,921,327 3.79
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
12,303 302,921,327 4.06
30.6.21
Weighted
average Per share
From discontinued operations Earnings number of Amount
£'000 shares Pence
Basic EPS
Loss for the year attributable to the owners of the parent (899) 298,598,459 (0.30)
Adjusted Basic EPS
Adjusted Loss for the year attributable to the owners of the parent (899) 298,598,459 (0.30)
Options and Warrants - 4,322,868 -
Diluted EPS
Loss for the year attributable to the owners of the parent (899) 302,921,327 (0.30)
Adjusted Diluted EPS
Adjusted loss for the year attributable to the owners of the parent (899) 302,921,327 (0.30)
Weighted average number of shares 30.6.22 30.6.21
Shares Shares
Basic EPS 298,995,582 298,598,459
Diluted EPS 305,218,306 302,921,327
12. CONTINUING AND DISCONTINUED OPERATIONS
The analysis between continuing and discontinued operation is as follows:
Year ended 30 June 2022
Continuing operations Discontinuing operations
TOTAL
£'000 £'000 £'000
Revenue 62,832 - 62,832
Cost of sales (11,570) - (11,570)
Gross profit 51,262 - 51,262
Administrative expense (36,726) - (36,726)
Share based payments (456) - (456)
Exceptional costs (475) - (475)
OPERATING PROFIT 13,605 - 13,605
Finance income 57 - 57
Finance costs (57) - (57)
PROFIT BEFORE INCOME TAX 13,605 - 13,605
Income tax expense (1,774) - (1,774)
PROFIT FOR THE YEAR 11,831 - 11,831
Year ended 30 June 2021
Continuing operations Discontinuing operations
TOTAL
£'000 £'000 £'000
Revenue 58,124 2,426 60,550
Cost of sales (10,356) (1,211) (11,567)
Gross profit 47,768 1,215 48,983
Administrative expense (34,089) (2,012) (36,101)
Share based payments (625) - (625)
Exceptional costs (188) - (188)
OPERATING PROFIT 12,866 (797) 12,069
Finance income 20 - 20
Finance costs (74) (1) (75)
PROFIT BEFORE INCOME TAX 12,812 (798) 12,014
Income tax expense (1,322) (101) (1,423)
PROFIT FOR THE YEAR 11,490 (899) 10,591
13. GOODWILL
Group
30.6.22 30.6.21
COST £'000 £'000
At 1 July 13,192 13,192
13,192 13,192
At 30 June
IMPAIRMENT
At 1 July 3,512 3,512
At 30 June 3,512 3,512
NET BOOK VALUE 9,680 9,680
Goodwill is allocated to the Groups cash generating unit (CGUs) identified,
being Dotdigital.
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 CGUs that are expected to benefit from that
business combination.
The carrying amount of goodwill relates to the Groups trading activity and
business segment. 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. Cash flows beyond the five-year period are extrapolated
using the estimated growth rate for the continuing operations of the Group.
These long-term growth rates are management's estimates. The discount rates
used are pre-tax and reflect specific risks relating to the continuing
operations of the Group.
The key assumptions for the value in use calculations are those regarding
discount rates, growth rates, and expected changes in margins.
Discount rate
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. The pre-tax discount rate used to calculate the value in use is
19.75% (2021: 6.2%). This has increased as a result of the increase in the
cost equity which was impacted by both the decline in the share price at the
year end compared to last year and the increase in dividend growth rate.
Growth rates
The growth rate is stated as the compound annual growth rates in the initial
five years for the continuing operations of the Group which are then used for
impairment testing. These are performed using the projected cash flows based
on budgets approved by management over a five-year period. Cash flow
projections from the sixth year onwards are based on an estimated constant
growth rate. The growth rate used to calculate the value in use is 15% (2021:
14%).
Gross profit margin
Changes in income and expenditure are based on experience and expectations of
the future changes in the market. The impairment review is based on these
estimated gross profit margins which were included with the budgets approved
by management over a five-year period. From the sixth year onwards, an assumed
constant margin is used. The gross profit margin used to calculate the value
in use in 75% (2021: 75%).
The valuations indicate sufficient headroom such that a reasonably possible
change in key assumptions would not result in impairment of goodwill.
Sensitivity analysis
The principal variables used, being both the discount rate and growth rates,
these would need to change before an impairment is required, this being 161%
(2021: 225%) discount rate and growth rate of -5% (2021: -21%).
14. INTANGIBLE ASSETS
Group
Customer
relationships Technology
£'000 £'000
COST
At 1 July 2021 1,205 1,200
Additions - -
At 30 June 2022 1,205 1,200
AMORTISATION
At 1 July 2021 1,205 430
Amortisation for the year - 120
At 30 June 2022 1,205 550
NET BOOK VALUE
At 30 June 2022 - 650
Internally generated development
Computer Domain
software costs names Totals
£'000 £'000 £'000 £'000
COST
At 1 July 2021 1,023 34,052 46 37,526
Additions 87 7,599 - 7,686
Exchange differences 1 - - 1
At 30 June 2022 1,111 41,651 46 45,213
AMORTISATION
At 1 July 2021 874 18,847 36 21,392
Amortisation for the year 71 5,931 1 6,123
At 30 June 2022 945 24,778 37 27,515
NET BOOK VALUE
At 30 June 2022 166 16,873 9 17,698
Customer
relationships Technology
£'000 £'000
COST
At 1 July 2020 1,205 1,200
Additions - -
At 30 June 2021 1,205 1,200
AMORTISATION
At 1 July 2020 1,205 310
Amortisation for the year - 120
At 30 June 2021 1,205 430
NET BOOK VALUE
At 30 June 2021 - 770
Internally generated development
Computer Domain
software costs names Totals
£'000 £'000 £'000 £'000
COST
At 1 July 2020 954 27,255 42 30,656
Additions 69 6,797 4 6,870
At 30 June 2021 1,023 34,052 46 37,526
AMORTISATION
At 1 July 2020 793 14,255 34 16,597
Amortisation for the year 81 4,592 2 4,795
At 30 June 2021 874 18,847 36 21,392
NET BOOK VALUE
At 30 June 2021 149 15,205 10 16,134
Development cost additions represents resources the Group has 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.
15. PROPERTY, PLANT AND EQUIPMENT
Group
Right of Short Fixtures & Computer
Use assets leasehold fittings equipment Totals
£'000 £'000 £'000 £'000 £'000
COST
At 1 July 2021 5,384 725 754 2,614 9,477
Additions 167 - - 465 632
Disposals (60) - - - (60)
Exchange differences 64 6 19 23 112
At 30 June 2022 5,555 731 773 3,102 10,161
DEPRECIATION
At 1 July 2021 2,061 526 680 2,238 5,505
Depreciation for the year 983 61 40 236 1,320
Disposals (45) - - - (45)
Exchange differences 56 6 16 18 96
At 30 June 2022 3,055 593 736 2,492 6,876
NET BOOK VALUE
At 30 June 2022 2,500 138 37 610 3,285
Right of Short Fixtures & Computer
Use assets leasehold fittings equipment Totals
£'000 £'000 £'000 £'000 £'000
COST
At 1 July 2020 5,458 730 770 2,473 9,431
Additions 115 - - 169 284
Disposals (136) - (4) (14) (154)
Exchange differences (53) (5) (12) (14) (84)
At 30 June 2021 5,384 725 754 2,614 9,477
DEPRECIATION
At 1 July 2020 1,058 465 632 2,014 4,169
Depreciation for the year 1,091 65 63 244 1,463
Disposals (66) - (2) (10) (78)
Exchange differences (22) (4) (13) (10) (49)
At 30 June 2021 2,061 526 680 2,238 5,505
NET BOOK VALUE
At 30 June 2021 3,323 199 74 376 3,972
Included in the net carrying amount of property, plant and equipment are the
right-of-use assets as follows:
Motor
Properties vehicles Totals
£'000 £'000 £'000
COST
As at 1 July 2021 5,229 155 5,384
Termination of leases (60) - (60)
Additions 167 - 167
Foreign currency translation 64 - 64
At 30 June 2022 5,400 155 5,555
DEPRECIATION
As at 1 July 2021 1,942 119 2,061
Depreciation for the year 953 30 983
Termination of leases (45) - (45)
Foreign currency translation 56 - 56
At 30 June 2022 2,906 149 3,055
NET BOOK VALUE
At 30 June 2022 2,494 6 2,500
Motor
Properties vehicles Totals
£'000 £'000 £'000
COST
As at 1 July 2020 5,376 82 5,458
Termination of leases (136) - (136)
Additions 42 73 115
Foreign currency translation (53) - (53)
At 30 June 2021 5,229 155 5,384
DEPRECIATION
As at 1 July 2020 1,015 43 1,058
Depreciation for the year 1,010 81 1,091
Termination of leases (65) - (65)
Foreign currency translation (18) (5) (23)
At 30 June 2021 1,942 119 2,061
NET BOOK VALUE
At 30 June 2021 3,287 36 3,323
16. INVESTMENTS
Company
Group Group
undertakings undertakings
30.6.22 30.6.21
COST £'000 £'000
At 1 July 21,660 21,035
Additions 456 625
Disposals - -
At 30 June 22,116 21,660
IMPAIRMENT
At 1 July and 30 June 3,519 3,519
Impairment 234 -
At 30 June 3,753 3,519
NET BOOK VALUE
At 30 June 18,363 18,141
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 directly %
Dotdigital EMEA Limited Omni-channel Ordinary 100
communication platform
Dotdigital Inc Omni-channel communication platform Ordinary 100
Dotdigital APAC Pty Limited Omni-channel communication platform Ordinary 100
Dotdigital B.V. Omni-channel communication platform Ordinary 100
Dotmailer Development Ltd Holding company Ordinary 100
Dotmailer SA Pty Development hub Ordinary 100
Dotmailer LLC** Development hub Ordinary 100
Dotdigital SG Pte Limited Omni-channel communication platform
Ordinary 100
Dynmark International Ltd Omni-channel communication platform Ordinary 100
Dynmark S.p z.o.o** Development hub Ordinary 100
Dotdigital Canada Inc Consultancy services Ordinary 100
** These are held indirectly at 100%.
All of the above subsidiaries have been included within the consolidated
results, however Dynmark International Ltd was exempt from audit by virtue of
s479A of Companies Act 2006 plus Dotdigital Canada Inc was also fully shut
down before the year end. Dotdigital EMEA Limited, Dotmailer Development
Limited and Dynmark International Ltd were incorporated in England and Wales.
Dotdigital Inc was incorporated in Delaware (US), Dotdigital APAC Pty Limited
was incorporated in New South Wales (Australia), Dotdigital B.V. was
incorporated in Netherlands, Dotdigital SG Pte Ltd was incorporated in
Singapore, Dotmailer SA Pty was incorporated in South Africa, Dotmailer LLC
was incorporated in the Republic of Belarus, Dynmark S.p. z.o.o. was
incorporated in Poland and Dotdigital Canada Inc was incorporated in British
Columbia (Canada).
Subsidiary Registered office
Dotdigital EMEA Ltd No.1 London Bridge
Dynmark International Ltd London
Dotmailer Development Ltd SE1 9BG
Dotdigital Inc 16192 Coastal Highway
Lewes
Delaware 19958-9776
County of Sussex
USA
Dotdigital Canada Inc 939 Granville Street
Vancouver
British Columbia
V6Z 1L3
Canada
Dotdigital APAC Pty Ltd 60/2 O'Connell Street
Parramatta
New South Wales 2150
Australia
Dotdigital SG Pte Ltd Level 17, Frasers Tower
182 Cecil Street
069547 Singapore
Dotmailer SA Pty Ltd BDO Building
Wanderers Office Park
52 Corlett Drive
Illovo
Johannesburg 2196
South Africa
Dotdigital B.V. 15 Hoogoorddreef
Amsterdam
1101 BA
Netherlands
Dynmark s.p. z.o.o Al. Jana Pawla II 22
00-133 Warsaw
Poland
Dotmailer LLC Office 11-9
Tolbukhina Street
Minsk 220012
Belarus
17. TRADE AND OTHER RECEIVABLES
Group Company
30.6.22 30.6.21 30.6.22 30.6.21
£'000 £'000 £'000 £'000
Current:
Trade receivables 10,748 10,895 - -
Less: Provision for impairment of trade receivables - -
(1,892) (1,785)
Trade receivables - net 8,856 9,110 - -
Other receivables 52 60 - -
Amounts owed by Group undertakings - - 1,426 -
VAT - - 34 52
Tax receivable 186 - - -
Prepayments and contract assets 4,117 4,180 845 88
13,211 13,350 1,545 140
Further details on the above can be found in note 23.
Included within Group prepayments is an amount of £246,057 (2021: £299,016)
in relation to deferred commission which is considered to be long term. The
Group has applied IFRS 9 simplified approach to measuring expected credit
losses, the balances have been assessed based on each entitiy's ability to
repay amounts owed and no expected credit loss has been recognised.
18. CASH AND CASH EQUIVALENTS
Group Company
30.6.22 30.6.21 30.6.22 30.6.21
£'000 £'000 £'000 £'000
Bank accounts 43,919 31,951 163 85
43,919 31,951 163 85
Further details on the above can be found in note 23.
19. CALLED UP SHARE CAPITAL
Allotted, issued, fully paid Nominal 30.6.22 30.6.21
Number value £'000 £'000
299,216,130 (2021: 298,778,630) £0.005 1,496 1,494
1,496 1,494
During the reporting period the Company undertook the following transactions
involving the issuing of share capital:
On 1 April 2022 an employee exercised their share options, increasing the
issued share capital by 437,500 shares.
20. RESERVES
Group
Retained Share Reverse acquisition
earnings premium reserve
£'000 £'000 £'000
As at 1 July 2021 54,081 7,124 (4,695)
Issue of share capital - - -
Dividends (2,564) - -
Profit for the year 11,831 - -
Transfer of reserves 234 - -
Deferred tax on share options - - -
Other comprehensive income: currency translation - - -
Share-based payment - - -
Balance as at 30 June 2022 63,582 7,124 (4,695)
Retranslation Other
Reserve reserves Totals
£'000 £'000 £'000
As at 1 July 2021 (37) 3,066 59,539
Issue of share capital - - -
Dividends - - (2,564)
Profit for the year - - 11,831
Transfer of reserves - (234) -
Deferred tax on share options - (1,283) (1,283)
Other comprehensive income: currency translation 333 - 333
Share-based payment - 456 456
Balance as at 30 June 2022 296 2,005 68,312
Group
Retained Share Reverse acquisition
earnings premium reserve
£'000 £'000 £'000
As at 1 July 2020 45,655 6,967 (4,695)
Issue of share capital - 157 -
Dividends (2,472) - -
Profit for the year 10,591 - -
Transfer of reserves 307 - -
Deferred tax on share options - - -
Other comprehensive income: currency translation - - -
Share-based payment - - -
Balance as at 30 June 2021 54,081 7,124 (4,695)
Retranslation Other
reserve reserves Totals
£'000 £'000 £'000
As at 1 July 2020 50 1,600 49,577
Issue of share capital - - 157
Dividends - - (2,472)
Profit for the year - - 10,591
Transfer in reserves - (307) -
Deferred tax on share options - 1,148 1,148
Other comprehensive income: currency translation (87) - (87)
Share-based payment - 625 625
Balance as at 30 June 2021 (37) 3,066 59,539
Company
Retained Share Other
earnings premium Reserves Totals
£'000 £'000 £'000 £'000
At 1 July 2021 7,570 7,124 1,690 16,384
Issue of share capital - - - -
Dividends (2,564) - - (2,564)
Profit for the year 4,163 - - 4,163
Transfer in reserves 231 - (231) -
Share based payments - - 456 456
At 30 June 2022 9,400 7,124 1,915 18,439
Company
Retained Share Other
earnings premium Reserves Totals
£'000 £'000 £'000 £'000
At 1 July 2020 5,924 6,967 1,372 14,263
Issue of share capital - 157 - 157
Dividends (2,472) - - (2,472)
Profit for the year 3,811 - - 3,811
Transfer in reserves 307 - - 307
Share based payments - - 318 318
Restated balance as at 30 June 2021 7,570 7,124 1,690 16,384
21. TRADE AND OTHER PAYABLES
Group Company
30.6.22 30.6.21 30.6.22 30.6.21
£'000 £'000 £'000 £'000
Current:
Trade payables 2,428 769 81 16
Amounts owed to Group undertakings - - - 390
Social security and other taxes 68 29 - -
Other payables 151 84 - -
VAT 228 18 - -
Accruals and contract liabilities 9,779 8,434 61 86
12,654 9,334 142 492
Further details on liquidity and interest rate risk can be found in note 23.
Amounts owed to group undertakings are non-interest bearing and are repayable
on demand.
22. LEASE LIABILITIES
Group
Properties Motor Vehicles Totals
£'000 £'000 £'000
At 1 July 2021 3,359 64 3,423
Termination of leases (15) - (15)
Additions 167 - 167
Principal repayments (1,081) (29) (1,110)
Interest 89 1 90
Foreign currency retranslation 21 - 21
At 30 June 2022 2,540 36 2,576
Current 796 22 818
Non-current 1,744 14 1,758
At 30 June 2022 2,540 36 2,576
Group
Properties Motor Vehicles Totals
£'000 £'000 £'000
At 1 July 2020 4,427 40 4,467
Termination of leases (67) - (67)
Additions 42 73 115
Principal repayments (1,132) (50) (1,182)
Interest 110 1 111
Foreign currency retranslation (21) - (21)
At 30 June 2021 3,359 64 3,423
Current 906 28 934
Non-current 2,453 36 2,489
At 30 June 2021 3,359 64 3,423
The properties are office leases located in various location where the term in
ranging from one to eight years. The motor vehicles are company cars offered
to senior staff where the term is always three years.
23. 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 is 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
- Lease Liabilities
Financial instruments by category
The following table sets out the financial instruments as at the reporting
date:
Group Company
30.6.22 30.6.21 30.6.22 30.6.21
£'000 £'000 £'000 £'000
Financial assets
Trade and other receivables 8,908 9,170 - -
Amounts owed from group undertakings - - 1,426 -
Bank balances 43,919 31,951 163 85
52,827 41,121 1,589 85
Financial liabilities
Trade payables 2,428 769 81 16
Amounts owed to group undertakings - - - 390
Accrued liabilities and other payables 9,779 8,221 61 86
12,207 8,990 142 492
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 £13,175,482 (2021: £10,221,000) 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 2021 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:
30.6.22 30.6.21
£'000 £'000
0-30 days 6,225 5,734
30-60 days 2,572 2,701
More than 60 days 1,951 2,550
10,748 10,985
The maturity of the Group's provision for impairment is as follows:
30.6.22 30.6.21
£'000 £'000
0-30 days 195 140
30-60 days 231 154
More than 60 days 1,466 1,491
1,892 1,785
The movement in the provision for the impairment is as follows:
30.06.22 30.6.21
£'000 £'000
As at 1 July 1,785 1,589
Provision for impairment 126 262
Receivable written off in the year (19) (66)
Unused amount reversed - -
As at 30 June 1,892 1,785
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 £2,055,923 (2021: £2,484,862) of which
£1,476,586) (2021: £1,502,918) 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 £nil (2021: £nil)
and amounts payable over one year are nil (2021: £nil). The Group had a
strong cash reserve to utilise for any short-term capital requirements that
were needed.
The Group has continued to look for 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.
Foreign currency exchange rate risk
Refer to foreign currency exchange rate risk under note 2..
Maturities of financial liabilities
The tables below analyse the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities for all
non-derivative financial liabilities (the Group does not hold any derivative
financial instruments in the current or prior financial year).
The amounts disclosed in the table are the contractual undiscounted cash
flows. Balances due within 12 months equal their carrying balances as the
impact of the discounting is not significant.
<6 months 6 to 12 months 1 to 2 years 2 to 5 years Total contractual cash flows carrying amounts
£'000 £'000 £'000 £'000 £'000
Contractual maturities at 30 June 2022
Trade and other payables 12,654 - - - 12,654
Lease liabilities 425 392 741 1,018 2,576
Total non-derivatives 13,079 392 741 1,018 15,230
<6 months 6 to 12 months 1 to 2 years 2 to 5 years Total contractual cash flows carrying amounts
£'000 £'000 £'000 £'000 £'000
Contractual maturities at 30 June 2021
Trade and other payables 9,334 - - - 9,334
Lease liabilities 480 454 759 1,730 3,423
Total non-derivatives 9,814 454 759 1,730 12,757
24. DEFERRED TAX
30.6.22 30.6.21
£'000 £'000
As at 1 July 1,207 1,983
Current year provision 1,548 (776)
2,755 1,1,207
The deferred tax liability above comprises the following temporary
differences:
30.6.22 30.6.21
£'000 £'000
Acquired intangibles 163 146
Capital allowances in excess of depreciation 82 38
Temporary differences (82) -
R&D relief in excess of amortisation 3,181 2,963
Share option relief (453) (1,805)
Losses (136) (135)
2,755 1,207
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.
25. CAPITAL COMMITMENTS
The Company and Group have no capital commitments as at the year end.
26. 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 and were made
on terms equivalent to those that prevail in arm's length transactions.
30.6.22 30.6.21
£'000 £'000
Sale of services
Ipswich Town Football Club Entity under common directorship Email marketing services 5 4
Epwin Group Plc Entity under common directorship Email marketing services 4 6
9 10
Year end balances arising from sale of services 30.6.22 30.6.21
£'000 £'000
Ipswich Town Football Club Entity under common directorship Email marketing services - 1
Epwin Group Plc Entity under common directorship Email marketing services - 1
- 2
Directors
30.6.22 30.6.21
£'000 £'000
Aggregate emoluments 938 1,136
Ex-gratia payment 213 -
Company contributions to money purchase pension scheme 25 26
Share-based payments from the LTIP options granted 176 347
1,352 1,509
Directors' pay summary does include Non-Executive Directors. Ex-gratia payment
related to a settlement payment made to the old CFO.
Information in relation to the highest paid Director is as follows:
30.6.22 30.6.21
£'000 £'000
Salaries 529 574
Other benefits 2 14
Pension costs 18 16
Share-based payments on the LTIP options granted 126 198
675 802
Company
The following transactions were carried out with related parties
30.06.22 30.06.21
£'000 £'000
Year end balances arising from sales/purchase of services
Dotdigital EMEA Limited Subsidiary Receivables/(Payables) 2,151 (651)
2,151 (651)
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
30.6.22 30.6.20
£'000 £'000
Dotdigital EMEA Limited Subsidiary
As at 1 July (1,041) (3,545)
Loans advanced 5,653 5,075
Loans repaid (3,886) (2,571)
(726) (1,041)
IAS 24 Related Party Disclosure (Revised) allows disclosure exemption of
transactions between wholly-owned subsidiaries that are eliminated on
consolidation.
27. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party of the Group. Dotdigital Group Plc acts
as the Parent Company to Dotdigital EMEA Limited, Dotdigital Inc, Dotdigital
APAC Pty Limited, Dotdigital B.V., Dotmailer Developments Limited, Dotmailer
SA Pty, Dotmailer LLC, Dotdigital SG Pte. Limited, Dynmark International Ltd,
Dotdigital Canada Inc and Dynmark S.p. z.o.o.
28. 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 £455,549 (2021: £625,000).
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 below illustrates the number and weighted average exercise price
(WAEP) of, and movements in, share options during the period. The options
outstanding at 30 June 2022 had a WAEP of 49.04p (2021: 26.05p) and a weighted
average contracted life of 5.82 years (2021: 5.14 years) and their exercise
prices ranged from 0.5p to 181.2p. All share options are settled in form of
equity issued.
30.06.22 30.6.21
No of options WAEP No of options WAEP
Outstanding at the beginning of the period 4,292,735 26.05p 3,910,984 51.09p
Granted during the year 2,463,663 89.85p 1,093,728 104.67p
Forfeited/cancelled during the period (259,562) 137.88p (480,992) 13.03p
Exchanged for shares (437,500) 0.50p (230,985) 68.50p
Outstanding at the end of the period 6,059,337 49.04p 4,292,735 26.05p
Exercisable at the end of the period - - - -
The weighted average share price at the date of the exercise for share options
exercised during the period was 0.84p (2021: 178.57p). For options granted
after 2019, a Monte Carlo model was used in measuring the fair use of options
granted that were subject to a TSR performance condition. A Black Scholes
model was used in measuring the fair use of all other options granted.
22 December 2020 23 September 2021 24 December 2021
Relative Relative Relative
EPS (50%) TSR (50%) EPS (50%) TSR (50%) EPS (50%) TSR (50%)
Number of options granted 153,364 153,364 100,729 100,729 193,894 193,894
Share price at grant date 152.0p 152.0p 264.0p 264.0p 196.0p 196.0p
Exercise price 0.50p 0.50p 0.50p 0.50p 0.50p 0.50p
Option life in years 5 years 5 years 5 years 5 years 5 years 5 years
Risk-free rate (0.08)% (0.08)% 0.38% 0.38% 0.57% 0.57%
Expected volatility 40.40% 40.40% 39.00% 39.00% 43.00% 43.00%
Expected dividend yield 0% 0% 0% 0% 0% 0%
Fair value of options 152.0p 99.0p 264.0p 181.0p 196.0p 115.0p
19 December 24 October 14 December 15 December 14 April
2017 2018 2020 2021 2022
Number of options granted 1,375,000 2,305,000 535,920 567,300 1,367,547
Share price at grant date 85.95p 77.5p 148.0p 181.0p 90.0p
Exercise price 0.50p 0.50p 147.5p 181.2p 86.5p
Option life in years 5 years 5 years 10 years 10 years 10 years
Risk-free rate 1.33% 1.23% (0.01)% 0.54% 1.68%
Expected dividend yield 1% 1% 0.56% 0.46% 0.96%
Fair value of options 65.3p 52.7p 47.0p 62.0p 42.0p
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 24 October 2018, 22 December 2020, 23 September
2021 and 24 December 2021 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 key
personnel.
29. GROUP RECONCILIATION OF PROFIT BEFORE CORPORATION TAX TO CASH GENERATED FROM
OPERATIONS
Group Company
30.6.22 30.6.21 30.6.22 30.6.21
£'000 £'000 £'000 £'000
Current:
Profit before tax from all operations 13,605 12,014 4,163 3,811
Amortisation 6,123 4,795 - -
Depreciation 1,124 1,267 2 2
Exceptional costs - 68 - -
Finance lease non-cash movement 152 (48) - -
Gain on disposal of fixed assets - (2) - -
Loss on disposal of investments - - - -
Share-based payments 456 625 - -
Impairment on investment - - 235 -
Finance expense 57 75 - -
21,517 18,794 4,400 3,813
(Increase)/decrease in trade receivables 325 (363) (1,405) 657
Increase in trade payables 3,320 (462) (350) (2,464)
Cash generated from operations 25,162 17,969 2,645 2,006
30. 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
£'000 £'000
As at 1 July 2020 25,383 396
As at 30 June 2021 31,951 85
As at 30 June 2022 43,919 163
31. PROJECT DEVELOPMENT
During the year the Group incurred £7,599,073 (2021: £6,797,279) in
development investments. All resources utilised in development have been
capitalised as outlined in the accounting policy governing this area.
32. EVENTS AFTER THE END OF THE REPORTING PERIOD
There are no events after the end of the reporting period which impact the
Group's and Company's financial statements.
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