REG - dotDigital Group plc - Interim Results
05/03/2024 07:00
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RNS Number : 5475F dotDigital Group plc 05 March 2024
5 March 2024
Dotdigital Group plc
("Dotdigital" or the "Group")
Interim results for the six months ended 31 December 2023
Strong growth in line with expectations and expanded addressable market
Dotdigital Group plc (AIM: DOTD), the leading SaaS provider of an all-in-one
customer experience and data platform (CXDP), announces its unaudited interim
results for the six months ended 31 December 2023 ("H1 FY24").
Financial Highlights
· Group revenue increased 15% to £38.7m (H1 FY23: £33.8m)
o Organic revenue (excluding Fresh Relevance) increased 11% in constant currency
(9% on a reported basis) to £36.9m
· Recurring and repeating revenue as a percentage of total revenue was 94% (H1
FY23: 95%) and contracted recurring revenue represents 79% of total revenue
(H1 FY23: 79%)
· ARPC(1) increased 9% to £1,709 per month (H1 FY23: £1,573 per month), not
materially affected by the Fresh Relevance acquisition
· Adjusted EBITDA(2) of £12.4m up 13% from £11.1m
· Adjusted profit before tax(3) of £8.9m, in line with management expectations
and 16% above prior year (H1 FY23: £7.7m), driven by revenue growth and
increased interest income
· Net cash balance of £37.1m on 31 December 2023 (H1 FY23: £49.6m) following
acquisition of Fresh Relevance (of which £18.8m was in cash)
Operational Highlights
· Healthy demand with total bookings ahead of last year, and particularly strong
contribution from new customers as the broader platform offering gains
traction in higher value deals
· Fresh Relevance integration on track with joint offering delivering new,
larger enterprise customer wins
· International footprint delivering growth in all markets, with organic
international revenue growth of 11.5% (18% in constant currency) driving total
international revenues to £12.9m (H1 FY23: £11.5m), representing 33% of
total revenue (H1 FY23: 34%)
· Ongoing product innovation with a focus on predictive analytics and real time
automation functionality
· Growing new business pipeline, including larger enterprise opportunities, with
trading at the start of H2 tracking in line with Board and market
expectations(4) for the full year
Milan Patel, CEO of Dotdigital, commented:
"We're pleased to report on a period of continued financial growth alongside
the acceleration of our product roadmap and a growing market opportunity. We
have invested into broadening and enhancing our platform offering, and we are
seeing good levels of uptake, particularly from new customers, and our
strengthened foundations across territories are translating into growth.
The acquisition of Fresh Relevance during the period added highly
complementary personalisation technology to our offering, delivering early new
business and cross selling success and a growing pipeline of larger value
deals. Our proposition is now even further aligned with the market-wide demand
for an all-in-one digital marketing platform, complemented by our
sophisticated AI and machine learning tools.
We enter the second half with continued momentum, in line with Board
expectations. Whilst cognisant of wider macroeconomic conditions across our
markets, our robust financial position, comprehensive product offering
servicing a diverse customer base and an expanded pipeline of opportunities
leave us confident in the Group's continued success."
Analyst Briefing and Investor Presentation
Management will be hosting a live online presentation for analysts today at
9am GMT. To register to attend the analyst presentation, please contact
dotdigital@almastrategic.com.
Live presentation to investors: Management will host a live online
presentation to investors via the Investor Meet Company platform on Thursday,
7 March 2024 at 4pm GMT. The presentation is open to all existing and
potential shareholders. Investors can sign up to Investor Meet Company for
free and add to meet Dotdigital via this link
(https://www.investormeetcompany.com/dotdigital-group-plc/register-investor) .
1: ARPC: Average revenue per customer (including new customers added in the
period and existing customers) based on our December billing
2: Adjusted EBITDA Earnings before interest, tax, depreciation and
amortisation, adjusted for exceptional items such as acquisition costs and
share based payments
3: Adjusted Profit before tax: Profit before tax adjusted for exceptional
items and share based payments
4: Market Expectations: market consensus for Revenue for the year to 30 June
2024 is £78.5m; and market consensus for adjusted PBT is £15.7m
For further information please contact:
Dotdigital Group Plc Tel: 020 3953 3072
Milan Patel, CEO
Alistair Gurney, CFO investorrelations@dotdigital.com
Alma Strategic Communications Tel: 020 3405 0210
Hilary Buchanan dotdigital@almastrategic.com
David Ison
Kieran Breheny
Canaccord Genuity (Nominated Advisor and Joint Broker) Tel: 020 7523 8000
Bobbie Hilliam, Corporate Finance
Jonathan Barr, Sales
Cavendish Capital Markets Limited (Joint Broker) Tel: 020 7220 0500
Jonny Franklin Adams, Corporate Finance
Sunila de Silva, Equity Capital Markets
Singer Capital Markets (Joint Broker) Tel: 020 7496 3000
Shaun Dobson, Corporate Finance
Alex Bond, Corporate Finance
About Dotdigital
Dotdigital Group plc (AIM: DOTD) is a leading provider of cross-channel
marketing automation technology to marketing professionals. Dotdigital's
customer experience and data platform (CXDP) combines the power of automation
and AI to help businesses deliver hyper-relevant customer experiences at
scale. With Dotdigital, marketing teams can unify and enrich their customer
data, identify valuable customer segments, and deliver personalised
cross-channel customer journeys that result in engagements, conversions, and
loyalty.
Founded in 1999, Dotdigital is headquartered in London with offices in
Croydon, Manchester, New York, Melbourne, Sydney, Singapore, Tokyo, Amsterdam,
Cape Town, and Warsaw. Dotdigital's solutions empower over 4,000 brands across
150 countries.
Operational Review
The Group reports a period of strong operational and financial progress in the
first half of the year, in line with management expectations. In addition to
further building out our Customer Experience and Data Platform (CXDP), we have
continued to grow in all regions, demonstrating the demand for Dotdigital's
digital marketing proposition despite tough macroeconomic conditions.
We delivered double-digit revenue growth of 15% to £38.7m (H1 FY23: £33.8m),
with underlying organic revenue growth (excluding Fresh Relevance) of 11% in
constant currency (9% reported). This follows major enhancements to our
platform offering following prior year investment in the product portfolio and
business operations. As expected, adjusted profit before tax was £8.9m (H1
FY23: £7.7m). Cash generation continues to be strong, and the Group ended
the period with a net cash balance of £37.1m, in line with Board
expectations, following the acquisition of Fresh Relevance during the period
(for up-front cash of £18.8m).
A core focus of our investments in the half has been to enhance our product
offering as we build out a comprehensive CXDP platform to address a larger
addressable market. Having implemented and enhanced our AI capabilities,
personalisation and omni-channel functionality during the first half,
Dotdigital is positioned with a significantly enhanced competitive edge within
our market, characterised by strong underlying demand for AI and machine
learning capabilities across all spheres of marketing, as organisations look
to optimise their campaigns and improve efficiency and ROI.
More broadly, we observe a continuation of the shift to digital marketing,
with marketers increasing their portion of spend towards digital channels,
particularly around retention marketing, favouring Dotdigital's proposition.
In September, we acquired personalisation software provider Fresh Relevance to
accelerate our CXDP offering. Fresh Relevance's cross-channel personalisation
and web technology is highly complementary to the Group's existing
proposition, and through the additional capabilities and technical expertise
brought about by the acquisition we are now better positioned to grow our
addressable market and attract higher value customers and contracts.
The integration of Fresh Relevance has progressed well to date, and we have
made significant headway to drive further growth both in combining our
proposition for customers through a unified onboarding, single sign-on
process, and the establishment of a joint go-to-market strategy.
The acquisition has brought 66 new people to the Group and, with the teams
having a strong existing relationship prior to September, we are pleased to
see the benefits of further collaboration. We now have established
cross-heritage teams, including within our product and engineering teams,
enabling Dotdigital and Fresh Relevance employees to learn from each other,
share best practices and share workload. The integration of our finance
functions has also progressed well, and we are slightly ahead of schedule with
delivering tangible cost savings from the process of integration.
Customer feedback has been very positive, and Fresh Relevance is already
contributing to new agreements with customers in larger segments, alongside
cross-selling to existing customers.
We have signed a number of new joint customers across e-commerce and not for
profit organisations, cross-sold in the EMEA region and now have three 'beta'
customers signed up in APAC, with a significant and increasing pipeline for
further agreements ahead. At the time of acquisition, we reported that Fresh
Relevance was expected to add c.£6.0m of annual revenues to the Group, and
the business is performing in line with expectations of revenue and
profitability for FY24.
Looking ahead, our achievements in the first half and strengthened proposition
have laid the groundwork for further growth into H2, with Dotdigital now
better positioned to grow within its verticals and ability to attract larger
customers. At the same time, the Board has the flexibility to continue
investing in the organic and inorganic growth opportunity through its strong
cash generation and high visibility of future venues.
Market
Digital marketing represents the core priority for marketing budgets, with
marketing professionals across all sectors set to further increase their
portion of spend towards digital channels. Supporting this, research shows
that 76% of business leaders plan to invest more or the same into digital
marketing in 2024(1), with a recognition that this channel generates the
highest return on their investment. Equally, with global economic conditions
remaining unsteady, there is a reinforced focus on retention marketing
alongside customer acquisition in order to deliver tangible ROI.
We operate in a large and growing market, estimated to be worth $6.5bn in 2023
and forecast to be worth $9.5bn in 2027(2). Alongside this, the
personalisation market is forecast to grow by over 23% annually from $943m in
2022 to $5.6bn by 2030(3). Our focus within these markets lies primarily in
the mid-market and enterprise segments, which form the bulk of value within
this market.
AI, machine learning and data-driven analytics are increasingly becoming more
important to power campaigns and we are seeing growing levels of inbound
interest in our AI-enabled platform. According to recent research, 63% of
marketers plan to invest in generative AI in the next two years(4). Alongside
this, many organisations are looking to consolidate their Martech stack to
more cost effective and quicker to deploy all-in-one solutions, positioning
Dotdigital well for further traction as it builds out its CXDP.
Email marketing continues to be the primary channel for customer engagement
with the highest return on investment. According to Litmus (2023), 87% of
brands say that Email Marketing is very critical to business success(5). Email
marketing still generates one of the highest returns from digital marketing
activity for every $1 spent generates a $36 return(6). Email Marketing
continues to become more highly personalised through the use of data across
their business systems and the use of AI functionality to create content.
Dotdigital has continued to enhance the platform in both of these areas to
help our customers drive efficiencies and ROI from their Marketing campaigns.
Alongside this, demand for omnichannel remains strong, with continued adoption
of SMS and a growing pipeline for WhatsApp and In-app Push messaging
capabilities across all regions. Reports show 63% of marketers have started or
plan to implement omnichannel as part of their marketing strategy in the next
6-12 months(7), reflecting the growing opportunities in these areas. The Group
will shortly be introducing the capability for customers to deploy campaigns
through WhatsApp native to the platform. These campaigns are based on
pre-approved templates approved by WhatsApp, reducing the need for
verification, which are expected to increase adoption rates across
Dotdigital's customers.
(1)https://www.webfx.com/blog/marketing/digital-marketing-spend-insights/
(https://www.webfx.com/blog/marketing/digital-marketing-spend-insights/)
(2)
https://www.researchandmarkets.com/report/marketing-automation?gclid=Cj0KCQjwtJKqBhCaARIsAN_yS_kZE2sqsfplTecCX23s4zuRyN4g
(https://www.researchandmarkets.com/report/marketing-automation?gclid=Cj0KCQjwtJKqBhCaARIsAN_yS_kZE2sqsfplTecCX23s4zuRyN4g)
(3)
https://www.statista.com/statistics/1415357/personalization-software-market-size-worldwide/
(https://www.statista.com/statistics/1415357/personalization-software-market-size-worldwide/)
(4)https://digitalmarketingsolutionssummit.co.uk/briefing/63-of-marketing-leaders-plan-to-invest-in-generative-ai-in-next-two-years/
(https://digitalmarketingsolutionssummit.co.uk/briefing/63-of-marketing-leaders-plan-to-invest-in-generative-ai-in-next-two-years/)
(5)https://www.litmus.com/resources/state-of-email-workflows
(https://www.litmus.com/resources/state-of-email-workflows)
(6) https://www.litmus.com/resources/email-marketing-roi/
(https://www.litmus.com/resources/email-marketing-roi/)
(7) https://www.digizuite.com/blog/omnichannel-statistics
(https://www.digizuite.com/blog/omnichannel-statistics)
Strategy
The Group growth strategy centres around its three strategic pillars:
geographic expansion, product innovation, and building on our strategic
partnership relationships.
Geographic expansion
Regional breakdown reported in local currency
The Group is pleased to report growth in all regions.
EMEA, the Group's largest market, organically grew 9% to £27.7m, in line with
our expectations. Including acquired revenues, growth was 16% to £29.3m. We
saw a good level of new bookings in the region, particularly from higher value
new customers, as organisations increasingly opt for a more comprehensive,
all-in-one marketing solution. We were also pleased to see a recovery in
professional services to more normalised levels as customers re-initiated
delayed projects.
The Group's momentum in North America continued to accelerate from FY23
levels, with revenues organically growing 8% to $7.0m. Including acquired
revenue, growth was 13% to $7.3m. Following investment in the region and the
bedding in of our regional team, we are delighted to the see the
re-established pipeline converting to sales, with the foundation now in place
for a return to double-digit growth over the medium term.
APAC continues its strong trajectory of double-digit growth, increasing 33% to
AUS$6.9m. Whilst it is a newer market for us, growing from a smaller base, we
see good potential in the region to take market share across the ANZ and Far
East Asia market. The Group continues to invest in its sales teams in Japan
and Singapore to support this expansion.
Product Innovation
As we work towards our vision of building the leading CXDP for marketers,
R&D efforts during the period were focused on two main product releases:
the release of '23three', launched in September, which was a milestone for
Dotdigital's unified customer data platform through the acquisition of Fresh
Relevance; and the release of '24four', launched in November just before the
busy peaks of Black Friday & Cyber Monday.
A continuous pace of product updates and new functionality continues to unlock
new value opportunities, both with new customers and up- and cross-selling
within the Group's extensive customer base. Existing customers expanding their
engagement of our platform offering is demonstrated by the increase in
functionality recurring revenue(3), which grew organically 8% to £13.2m (22%
to £14.9m including Fresh Relevance) (H1 FY23: £12.2m). Key innovation
highlights achieved during the period include:
· Single Sign On between the Dotdigital & Fresh Relevance platforms,
enabling a seamless authentication experience between the products. This has
now been adopted by over 30% of existing and new joint customers.
· WinstonAI™ our marketing intelligence engine now includes enhancements to
its generative AI by providing customers with campaign content grammar
checking, the ability to rewrite for tone, change the length of content,
rephrase content, add emojis and, in one-click, convert an email to an SMS
campaign. This is supported by user experience enhancements which have made
WinstonAI™ even easier to use and find in-app.
· The launch of a new Connect area to easily allow customers to manage, browse
& install integrations built by Dotdigital and verified technology
partners. Customers can now integrate their data with 170+ technologies within
their existing Martech stack.
· MMS (Multimedia Messaging Service) is now available as a native marketing
channel within the platform to enable rich communication to audiences within
North America. Early adopting customers have enjoyed up to 28x ROI from
their campaign deployments with increase engagement rates.
· SMS/MMS now can be personalised with liquid scripting to enable highly
advanced personalisation use cases such as abandoned cart, booking
notifications and order notifications on the SMS/MMS channel.
The initial phase of product integration of the Fresh Relevance platform was
completed in H1 and the second phase will continue into H2 with a focus on the
homogenisation of user experience between the products, streamlined onboarding
and further updates to the cross-platform data exchange of customer data. We
expect the final phases of product integration roadmap work to be complete by
the end of calendar 2024.
We are pleased to report that global software marketplace G2 recently
announced Dotdigital as a Winter 2024 Grid Leader in the Marketing Automation,
Transactional Email, Email Deliverability, Email Template Builder, Landing
Page Builder and CPaaS (Communications Platform As A Service) categories while
also being highly placed in; Customer Data Platform, SMS Marketing,
Personalization Engines, Mobile Marketing and Customer Journey Analytics. G2
reviews are based on customer feedback and the awards demonstrate our
continued innovation and the successful execution of our all-in-one CXDP
strategy.
Strategic Partnerships
Revenue from strategic partnerships continued to grow, albeit more modestly
than in H1 FY23, with growth in CRM connectors offset through the larger
e-commerce connectors. As a result, revenue through strategic partners grew 8%
to £16.7m (H1 FY23: £15.5m). The strategic partnerships assist in driving
brand awareness and provide global reach to complement our direct marketing
channels. The Group saw growth in both the verticals that we focus on. Our
customers using the e-commerce connectors grew 7% in the period from £10.6m
to £11.4m. Over the same period we also saw strong growth in customers using
the CRM connectors which grew 11% in the period from £4.8m to £5.3m.
As we look forwards, we will continue to enhance our strategic partnerships
into other business systems to make it very easy for our customers to bring
data into our customer data platform and see value in the combined offering.
We have also over the last six months strengthened our partner program which
is focussed around adding agency and technology partners that work within the
various ecosystems.
M&A
In line with the ongoing enhancement of the Group's CXDP proposition, the
Board continues to appraise acquisition opportunities to supplement organic
growth at appropriate target valuations.
As previously stated, the Group's acquisition strategy is broadly focused on
the following key categories: adjacent CXDP-related technologies that will
drive ARPC expansion and deepen our international markets; for talent and
brand to expand geographical coverage; and specialist functionality for target
verticals.
Current trading and outlook
Having significantly strengthened our offering in H1, we enter the second half
with good trading momentum and the ability to attract higher value deals,
underpinned by continuous product enhancements to drive cross- and up-sells
from the existing base. Supporting this are the long-term market drivers, with
customers increasing their digital marketing spend and exploring the range of
sophisticated AI and machine learning tools available to enhance their
campaigns and deliver better ROI.
Our focus in the second half continues to be around enhancing our proposition,
progressing the integration of Fresh Relevance capabilities into the Group's
platform, growing our presence across all of our regions and capturing the
increased opportunities now available to the Group. At the same time, we
continue to appraise acquisition opportunities to accelerate our product
development and unlock new verticals for the Group.
We remain confident in the Group's ability to continue to execute against its
stated strategy and meet market expectations and look forward to updating
shareholders on our progress in H2.
FINANCIAL REVIEW
Revenue
Revenue during the period grew 15% to £38.7m from £33.8m in H1 FY23. The
acceleration vs prior periods was driven by the acquisition of Fresh
Relevance. Organic Growth was 9% as acceleration in North America and APAC
was in part offset by adverse FX rate movement.
Recurring and repeating revenue continues to represent c.94% of revenues which
is substantially unchanged by the acquisition of Fresh Relevance. The gross
retention rate has remained stable despite macro-economic pressure which is
testament to the strength and diversity of our customer base. This same
pressure can be seen in relatively low growth rates to messaging volumes vs
previous years, however net retention rates and ARPC growth (now £1,709, up
9% from £1,573) have been maintained by strong positive movement in pricing
and upsell of additional functionality.
International revenue represented 33% of total revenues in the period, from
34% in H1 FY23. Rapid growth in APAC and strengthening in North America (33%
and 13% growth respectively in local currency) increased the proportion of
international revenues in the Group, but this was in part offset by changes to
FX rates and the relatively higher proportion of Fresh Relevance revenue which
is UK based. North American revenue was $7.3m (H1 FY23: $6.5m), while APAC
revenue was AUS$6.9m (H1 FY23: AUS$5.2m). EMEA revenues grew 16% in the period
to £29.3m (H1 FY23: £25.3m) largely accelerated by the Fresh Relevance
acquisition.
Gross Margin
Product gross margins remain consistent with the prior period. Total Gross
margin was 79.3% (H1 FY23: 79.1%) as Fresh Relevance gross margin was
consistent with Dotdigital organic margins.
EBITDA
We are pleased that the Group achieved an adjusted EBITDA margin of 32% and an
adjusted operating profit margin of 22% in the first half, which was in line
with management expectations. The Group saw the full period impact of costs
which ramped through the prior year as well as the impact of the Fresh
Relevance acquisition which had lower margins. We have experienced cost
inflation in many areas which is consistent with levels reported for the wider
economy, however this has been substantially mitigated through rationalisation
of certain back office costs negotiation with our suppliers and partners.
Exceptional costs in the period are driven by share based payments,
acquisition and integration costs of Fresh Relevance.
EBITDA growth of 13% to £12.4m (H1 FY23: £11.1m) is ahead of our organic
revenue growth, while Fresh relevance is expected to contribute positive
EBITDA in future periods as cost synergies are realised.
Balance Sheet & Cash Position
Dotdigital continues to generate strong cash flow from operations with an
interim period end net cash balance of £37.1m. Whilst there has been a brief
period of normalisation of working capital balances following the acquisition
of Fresh Relevance, the Group's historical strong cash generation has
continued and so we retain strategic options, particularly involving
opportunities to explore potential acquisitions of relevant adjacent
technologies.
Cash management has been an increasing priority over the past 18 months such
that we can optimise returns. We now use a mix of accounts at banks with the
highest credit ratings to balance security, accessibility and interest
income. Interest in the period increased to £0.6m vs £0.2m in H1 FY23,
despite having a lower balance following our acquisition of Fresh Relevance.
The Group continues to prioritise product development and so we have increased
spend broadly in line with revenue such that we spent c.£4.4m on development
(compared to £4.0m in H1 FY23).
Dividend Policy
A dividend of 1p per ordinary share (FY23: 0.98p) was proposed by the Company
at the time of its Final Results in November last year, demonstrating a
commitment from the Board to deliver value by focusing on total shareholder
return. This dividend was approved by shareholders at the Annual General
Meeting on 19 December 2023 and paid on 31 January 2024.
The Group will review the dividend at year end; therefore, in line with
previous years the Board is not proposing an interim dividend. We expect to
maintain our dividend policy of growing the full year dividend in line with
EBITDA.
Operational Highlights
· Healthy demand with total bookings ahead of last year, and particularly strong
contribution from new customers as the broader platform offering gains
traction in higher value deals
· Fresh Relevance integration on track with joint offering delivering new,
larger enterprise customer wins
· International footprint delivering growth in all markets, with organic
international revenue growth of 11.5% (18% in constant currency) driving total
international revenues to £12.9m (H1 FY23: £11.5m), representing 33% of
total revenue (H1 FY23: 34%)
· Ongoing product innovation with a focus on predictive analytics and real time
automation functionality
· Growing new business pipeline, including larger enterprise opportunities, with
trading at the start of H2 tracking in line with Board and market
expectations(4) for the full year
Milan Patel, CEO of Dotdigital, commented:
"We're pleased to report on a period of continued financial growth alongside
the acceleration of our product roadmap and a growing market opportunity. We
have invested into broadening and enhancing our platform offering, and we are
seeing good levels of uptake, particularly from new customers, and our
strengthened foundations across territories are translating into growth.
The acquisition of Fresh Relevance during the period added highly
complementary personalisation technology to our offering, delivering early new
business and cross selling success and a growing pipeline of larger value
deals. Our proposition is now even further aligned with the market-wide demand
for an all-in-one digital marketing platform, complemented by our
sophisticated AI and machine learning tools.
We enter the second half with continued momentum, in line with Board
expectations. Whilst cognisant of wider macroeconomic conditions across our
markets, our robust financial position, comprehensive product offering
servicing a diverse customer base and an expanded pipeline of opportunities
leave us confident in the Group's continued success."
Analyst Briefing and Investor Presentation
Management will be hosting a live online presentation for analysts today at
9am GMT. To register to attend the analyst presentation, please contact
dotdigital@almastrategic.com.
Live presentation to investors: Management will host a live online
presentation to investors via the Investor Meet Company platform on Thursday,
7 March 2024 at 4pm GMT. The presentation is open to all existing and
potential shareholders. Investors can sign up to Investor Meet Company for
free and add to meet Dotdigital via this link
(https://www.investormeetcompany.com/dotdigital-group-plc/register-investor) .
1: ARPC: Average revenue per customer (including new customers added in the
period and existing customers) based on our December billing
2: Adjusted EBITDA Earnings before interest, tax, depreciation and
amortisation, adjusted for exceptional items such as acquisition costs and
share based payments
3: Adjusted Profit before tax: Profit before tax adjusted for exceptional
items and share based payments
4: Market Expectations: market consensus for Revenue for the year to 30 June
2024 is £78.5m; and market consensus for adjusted PBT is £15.7m
For further information please contact:
Dotdigital Group Plc Tel: 020 3953 3072
Milan Patel, CEO
Alistair Gurney, CFO investorrelations@dotdigital.com
Alma Strategic Communications Tel: 020 3405 0210
Hilary Buchanan dotdigital@almastrategic.com
David Ison
Kieran Breheny
Canaccord Genuity (Nominated Advisor and Joint Broker) Tel: 020 7523 8000
Bobbie Hilliam, Corporate Finance
Jonathan Barr, Sales
Cavendish Capital Markets Limited (Joint Broker) Tel: 020 7220 0500
Jonny Franklin Adams, Corporate Finance
Sunila de Silva, Equity Capital Markets
Singer Capital Markets (Joint Broker) Tel: 020 7496 3000
Shaun Dobson, Corporate Finance
Alex Bond, Corporate Finance
About Dotdigital
Dotdigital Group plc (AIM: DOTD) is a leading provider of cross-channel
marketing automation technology to marketing professionals. Dotdigital's
customer experience and data platform (CXDP) combines the power of automation
and AI to help businesses deliver hyper-relevant customer experiences at
scale. With Dotdigital, marketing teams can unify and enrich their customer
data, identify valuable customer segments, and deliver personalised
cross-channel customer journeys that result in engagements, conversions, and
loyalty.
Founded in 1999, Dotdigital is headquartered in London with offices in
Croydon, Manchester, New York, Melbourne, Sydney, Singapore, Tokyo, Amsterdam,
Cape Town, and Warsaw. Dotdigital's solutions empower over 4,000 brands across
150 countries.
Operational Review
The Group reports a period of strong operational and financial progress in the
first half of the year, in line with management expectations. In addition to
further building out our Customer Experience and Data Platform (CXDP), we have
continued to grow in all regions, demonstrating the demand for Dotdigital's
digital marketing proposition despite tough macroeconomic conditions.
We delivered double-digit revenue growth of 15% to £38.7m (H1 FY23: £33.8m),
with underlying organic revenue growth (excluding Fresh Relevance) of 11% in
constant currency (9% reported). This follows major enhancements to our
platform offering following prior year investment in the product portfolio and
business operations. As expected, adjusted profit before tax was £8.9m (H1
FY23: £7.7m). Cash generation continues to be strong, and the Group ended
the period with a net cash balance of £37.1m, in line with Board
expectations, following the acquisition of Fresh Relevance during the period
(for up-front cash of £18.8m).
A core focus of our investments in the half has been to enhance our product
offering as we build out a comprehensive CXDP platform to address a larger
addressable market. Having implemented and enhanced our AI capabilities,
personalisation and omni-channel functionality during the first half,
Dotdigital is positioned with a significantly enhanced competitive edge within
our market, characterised by strong underlying demand for AI and machine
learning capabilities across all spheres of marketing, as organisations look
to optimise their campaigns and improve efficiency and ROI.
More broadly, we observe a continuation of the shift to digital marketing,
with marketers increasing their portion of spend towards digital channels,
particularly around retention marketing, favouring Dotdigital's proposition.
In September, we acquired personalisation software provider Fresh Relevance to
accelerate our CXDP offering. Fresh Relevance's cross-channel personalisation
and web technology is highly complementary to the Group's existing
proposition, and through the additional capabilities and technical expertise
brought about by the acquisition we are now better positioned to grow our
addressable market and attract higher value customers and contracts.
The integration of Fresh Relevance has progressed well to date, and we have
made significant headway to drive further growth both in combining our
proposition for customers through a unified onboarding, single sign-on
process, and the establishment of a joint go-to-market strategy.
The acquisition has brought 66 new people to the Group and, with the teams
having a strong existing relationship prior to September, we are pleased to
see the benefits of further collaboration. We now have established
cross-heritage teams, including within our product and engineering teams,
enabling Dotdigital and Fresh Relevance employees to learn from each other,
share best practices and share workload. The integration of our finance
functions has also progressed well, and we are slightly ahead of schedule with
delivering tangible cost savings from the process of integration.
Customer feedback has been very positive, and Fresh Relevance is already
contributing to new agreements with customers in larger segments, alongside
cross-selling to existing customers.
We have signed a number of new joint customers across e-commerce and not for
profit organisations, cross-sold in the EMEA region and now have three 'beta'
customers signed up in APAC, with a significant and increasing pipeline for
further agreements ahead. At the time of acquisition, we reported that Fresh
Relevance was expected to add c.£6.0m of annual revenues to the Group, and
the business is performing in line with expectations of revenue and
profitability for FY24.
Looking ahead, our achievements in the first half and strengthened proposition
have laid the groundwork for further growth into H2, with Dotdigital now
better positioned to grow within its verticals and ability to attract larger
customers. At the same time, the Board has the flexibility to continue
investing in the organic and inorganic growth opportunity through its strong
cash generation and high visibility of future venues.
Market
Digital marketing represents the core priority for marketing budgets, with
marketing professionals across all sectors set to further increase their
portion of spend towards digital channels. Supporting this, research shows
that 76% of business leaders plan to invest more or the same into digital
marketing in 2024(1), with a recognition that this channel generates the
highest return on their investment. Equally, with global economic conditions
remaining unsteady, there is a reinforced focus on retention marketing
alongside customer acquisition in order to deliver tangible ROI.
We operate in a large and growing market, estimated to be worth $6.5bn in 2023
and forecast to be worth $9.5bn in 2027(2). Alongside this, the
personalisation market is forecast to grow by over 23% annually from $943m in
2022 to $5.6bn by 2030(3). Our focus within these markets lies primarily in
the mid-market and enterprise segments, which form the bulk of value within
this market.
AI, machine learning and data-driven analytics are increasingly becoming more
important to power campaigns and we are seeing growing levels of inbound
interest in our AI-enabled platform. According to recent research, 63% of
marketers plan to invest in generative AI in the next two years(4). Alongside
this, many organisations are looking to consolidate their Martech stack to
more cost effective and quicker to deploy all-in-one solutions, positioning
Dotdigital well for further traction as it builds out its CXDP.
Email marketing continues to be the primary channel for customer engagement
with the highest return on investment. According to Litmus (2023), 87% of
brands say that Email Marketing is very critical to business success(5). Email
marketing still generates one of the highest returns from digital marketing
activity for every $1 spent generates a $36 return(6). Email Marketing
continues to become more highly personalised through the use of data across
their business systems and the use of AI functionality to create content.
Dotdigital has continued to enhance the platform in both of these areas to
help our customers drive efficiencies and ROI from their Marketing campaigns.
Alongside this, demand for omnichannel remains strong, with continued adoption
of SMS and a growing pipeline for WhatsApp and In-app Push messaging
capabilities across all regions. Reports show 63% of marketers have started or
plan to implement omnichannel as part of their marketing strategy in the next
6-12 months(7), reflecting the growing opportunities in these areas. The Group
will shortly be introducing the capability for customers to deploy campaigns
through WhatsApp native to the platform. These campaigns are based on
pre-approved templates approved by WhatsApp, reducing the need for
verification, which are expected to increase adoption rates across
Dotdigital's customers.
(1)https://www.webfx.com/blog/marketing/digital-marketing-spend-insights/
(https://www.webfx.com/blog/marketing/digital-marketing-spend-insights/)
(2)
https://www.researchandmarkets.com/report/marketing-automation?gclid=Cj0KCQjwtJKqBhCaARIsAN_yS_kZE2sqsfplTecCX23s4zuRyN4g
(https://www.researchandmarkets.com/report/marketing-automation?gclid=Cj0KCQjwtJKqBhCaARIsAN_yS_kZE2sqsfplTecCX23s4zuRyN4g)
(3)
https://www.statista.com/statistics/1415357/personalization-software-market-size-worldwide/
(https://www.statista.com/statistics/1415357/personalization-software-market-size-worldwide/)
(4)https://digitalmarketingsolutionssummit.co.uk/briefing/63-of-marketing-leaders-plan-to-invest-in-generative-ai-in-next-two-years/
(https://digitalmarketingsolutionssummit.co.uk/briefing/63-of-marketing-leaders-plan-to-invest-in-generative-ai-in-next-two-years/)
(5)https://www.litmus.com/resources/state-of-email-workflows
(https://www.litmus.com/resources/state-of-email-workflows)
(6) https://www.litmus.com/resources/email-marketing-roi/
(https://www.litmus.com/resources/email-marketing-roi/)
(7) https://www.digizuite.com/blog/omnichannel-statistics
(https://www.digizuite.com/blog/omnichannel-statistics)
Strategy
The Group growth strategy centres around its three strategic pillars:
geographic expansion, product innovation, and building on our strategic
partnership relationships.
Geographic expansion
Regional breakdown reported in local currency
The Group is pleased to report growth in all regions.
EMEA, the Group's largest market, organically grew 9% to £27.7m, in line with
our expectations. Including acquired revenues, growth was 16% to £29.3m. We
saw a good level of new bookings in the region, particularly from higher value
new customers, as organisations increasingly opt for a more comprehensive,
all-in-one marketing solution. We were also pleased to see a recovery in
professional services to more normalised levels as customers re-initiated
delayed projects.
The Group's momentum in North America continued to accelerate from FY23
levels, with revenues organically growing 8% to $7.0m. Including acquired
revenue, growth was 13% to $7.3m. Following investment in the region and the
bedding in of our regional team, we are delighted to the see the
re-established pipeline converting to sales, with the foundation now in place
for a return to double-digit growth over the medium term.
APAC continues its strong trajectory of double-digit growth, increasing 33% to
AUS$6.9m. Whilst it is a newer market for us, growing from a smaller base, we
see good potential in the region to take market share across the ANZ and Far
East Asia market. The Group continues to invest in its sales teams in Japan
and Singapore to support this expansion.
Product Innovation
As we work towards our vision of building the leading CXDP for marketers,
R&D efforts during the period were focused on two main product releases:
the release of '23three', launched in September, which was a milestone for
Dotdigital's unified customer data platform through the acquisition of Fresh
Relevance; and the release of '24four', launched in November just before the
busy peaks of Black Friday & Cyber Monday.
A continuous pace of product updates and new functionality continues to unlock
new value opportunities, both with new customers and up- and cross-selling
within the Group's extensive customer base. Existing customers expanding their
engagement of our platform offering is demonstrated by the increase in
functionality recurring revenue(3), which grew organically 8% to £13.2m (22%
to £14.9m including Fresh Relevance) (H1 FY23: £12.2m). Key innovation
highlights achieved during the period include:
· Single Sign On between the Dotdigital & Fresh Relevance platforms,
enabling a seamless authentication experience between the products. This has
now been adopted by over 30% of existing and new joint customers.
· WinstonAI™ our marketing intelligence engine now includes enhancements to
its generative AI by providing customers with campaign content grammar
checking, the ability to rewrite for tone, change the length of content,
rephrase content, add emojis and, in one-click, convert an email to an SMS
campaign. This is supported by user experience enhancements which have made
WinstonAI™ even easier to use and find in-app.
· The launch of a new Connect area to easily allow customers to manage, browse
& install integrations built by Dotdigital and verified technology
partners. Customers can now integrate their data with 170+ technologies within
their existing Martech stack.
· MMS (Multimedia Messaging Service) is now available as a native marketing
channel within the platform to enable rich communication to audiences within
North America. Early adopting customers have enjoyed up to 28x ROI from
their campaign deployments with increase engagement rates.
· SMS/MMS now can be personalised with liquid scripting to enable highly
advanced personalisation use cases such as abandoned cart, booking
notifications and order notifications on the SMS/MMS channel.
The initial phase of product integration of the Fresh Relevance platform was
completed in H1 and the second phase will continue into H2 with a focus on the
homogenisation of user experience between the products, streamlined onboarding
and further updates to the cross-platform data exchange of customer data. We
expect the final phases of product integration roadmap work to be complete by
the end of calendar 2024.
We are pleased to report that global software marketplace G2 recently
announced Dotdigital as a Winter 2024 Grid Leader in the Marketing Automation,
Transactional Email, Email Deliverability, Email Template Builder, Landing
Page Builder and CPaaS (Communications Platform As A Service) categories while
also being highly placed in; Customer Data Platform, SMS Marketing,
Personalization Engines, Mobile Marketing and Customer Journey Analytics. G2
reviews are based on customer feedback and the awards demonstrate our
continued innovation and the successful execution of our all-in-one CXDP
strategy.
Strategic Partnerships
Revenue from strategic partnerships continued to grow, albeit more modestly
than in H1 FY23, with growth in CRM connectors offset through the larger
e-commerce connectors. As a result, revenue through strategic partners grew 8%
to £16.7m (H1 FY23: £15.5m). The strategic partnerships assist in driving
brand awareness and provide global reach to complement our direct marketing
channels. The Group saw growth in both the verticals that we focus on. Our
customers using the e-commerce connectors grew 7% in the period from £10.6m
to £11.4m. Over the same period we also saw strong growth in customers using
the CRM connectors which grew 11% in the period from £4.8m to £5.3m.
As we look forwards, we will continue to enhance our strategic partnerships
into other business systems to make it very easy for our customers to bring
data into our customer data platform and see value in the combined offering.
We have also over the last six months strengthened our partner program which
is focussed around adding agency and technology partners that work within the
various ecosystems.
M&A
In line with the ongoing enhancement of the Group's CXDP proposition, the
Board continues to appraise acquisition opportunities to supplement organic
growth at appropriate target valuations.
As previously stated, the Group's acquisition strategy is broadly focused on
the following key categories: adjacent CXDP-related technologies that will
drive ARPC expansion and deepen our international markets; for talent and
brand to expand geographical coverage; and specialist functionality for target
verticals.
Current trading and outlook
Having significantly strengthened our offering in H1, we enter the second half
with good trading momentum and the ability to attract higher value deals,
underpinned by continuous product enhancements to drive cross- and up-sells
from the existing base. Supporting this are the long-term market drivers, with
customers increasing their digital marketing spend and exploring the range of
sophisticated AI and machine learning tools available to enhance their
campaigns and deliver better ROI.
Our focus in the second half continues to be around enhancing our proposition,
progressing the integration of Fresh Relevance capabilities into the Group's
platform, growing our presence across all of our regions and capturing the
increased opportunities now available to the Group. At the same time, we
continue to appraise acquisition opportunities to accelerate our product
development and unlock new verticals for the Group.
We remain confident in the Group's ability to continue to execute against its
stated strategy and meet market expectations and look forward to updating
shareholders on our progress in H2.
FINANCIAL REVIEW
Revenue
Revenue during the period grew 15% to £38.7m from £33.8m in H1 FY23. The
acceleration vs prior periods was driven by the acquisition of Fresh
Relevance. Organic Growth was 9% as acceleration in North America and APAC
was in part offset by adverse FX rate movement.
Recurring and repeating revenue continues to represent c.94% of revenues which
is substantially unchanged by the acquisition of Fresh Relevance. The gross
retention rate has remained stable despite macro-economic pressure which is
testament to the strength and diversity of our customer base. This same
pressure can be seen in relatively low growth rates to messaging volumes vs
previous years, however net retention rates and ARPC growth (now £1,709, up
9% from £1,573) have been maintained by strong positive movement in pricing
and upsell of additional functionality.
International revenue represented 33% of total revenues in the period, from
34% in H1 FY23. Rapid growth in APAC and strengthening in North America (33%
and 13% growth respectively in local currency) increased the proportion of
international revenues in the Group, but this was in part offset by changes to
FX rates and the relatively higher proportion of Fresh Relevance revenue which
is UK based. North American revenue was $7.3m (H1 FY23: $6.5m), while APAC
revenue was AUS$6.9m (H1 FY23: AUS$5.2m). EMEA revenues grew 16% in the period
to £29.3m (H1 FY23: £25.3m) largely accelerated by the Fresh Relevance
acquisition.
Gross Margin
Product gross margins remain consistent with the prior period. Total Gross
margin was 79.3% (H1 FY23: 79.1%) as Fresh Relevance gross margin was
consistent with Dotdigital organic margins.
EBITDA
We are pleased that the Group achieved an adjusted EBITDA margin of 32% and an
adjusted operating profit margin of 22% in the first half, which was in line
with management expectations. The Group saw the full period impact of costs
which ramped through the prior year as well as the impact of the Fresh
Relevance acquisition which had lower margins. We have experienced cost
inflation in many areas which is consistent with levels reported for the wider
economy, however this has been substantially mitigated through rationalisation
of certain back office costs negotiation with our suppliers and partners.
Exceptional costs in the period are driven by share based payments,
acquisition and integration costs of Fresh Relevance.
EBITDA growth of 13% to £12.4m (H1 FY23: £11.1m) is ahead of our organic
revenue growth, while Fresh relevance is expected to contribute positive
EBITDA in future periods as cost synergies are realised.
Balance Sheet & Cash Position
Dotdigital continues to generate strong cash flow from operations with an
interim period end net cash balance of £37.1m. Whilst there has been a brief
period of normalisation of working capital balances following the acquisition
of Fresh Relevance, the Group's historical strong cash generation has
continued and so we retain strategic options, particularly involving
opportunities to explore potential acquisitions of relevant adjacent
technologies.
Cash management has been an increasing priority over the past 18 months such
that we can optimise returns. We now use a mix of accounts at banks with the
highest credit ratings to balance security, accessibility and interest
income. Interest in the period increased to £0.6m vs £0.2m in H1 FY23,
despite having a lower balance following our acquisition of Fresh Relevance.
The Group continues to prioritise product development and so we have increased
spend broadly in line with revenue such that we spent c.£4.4m on development
(compared to £4.0m in H1 FY23).
Dividend Policy
A dividend of 1p per ordinary share (FY23: 0.98p) was proposed by the Company
at the time of its Final Results in November last year, demonstrating a
commitment from the Board to deliver value by focusing on total shareholder
return. This dividend was approved by shareholders at the Annual General
Meeting on 19 December 2023 and paid on 31 January 2024.
The Group will review the dividend at year end; therefore, in line with
previous years the Board is not proposing an interim dividend. We expect to
maintain our dividend policy of growing the full year dividend in line with
EBITDA.
Dotdigital Group Plc
Consolidated Income Statement
For the six months ended 31 December 2023
6 months 6 months 12 months
to 31 Dec 2023 to 31 Dec 2022 to 30 June 2023
Unaudited Unaudited Audited
Note £'000s £'000s £'000s
Revenue from contracts with customers 4 38,745 33,822 69,228
Cost of sales (8,022) (7,053) (14,351)
Gross profit 4 30,723 26,769 54,877
Administrative expenses (22,358) (19,222) (40,359)
Operating profit from operations pre share based payments and exceptional 8,365 7,547 14,518
costs
(364) (262) (736)
Share based payments
Exceptional costs 7 (1,200) (60) (234)
Operating profit 6,801 7,225 13,548
Finance income 608 214 895
Finance costs (27) (23) (57)
Profit before income tax 7,382 7,416 14,386
Income tax expense (1,346) (936) (1,791)
Profit for the period attributable to the owners of the Company 6,036 6,480 12,595
Earnings per share (pence per share)
Basic 6 1.99 2.17 4.21
Diluted 6 1.95 2.13 4.11
Adjusted basic 6 2.50 2.27 4.53
Adjusted diluted 6 2.46 2.23 4.43
Dotdigital Group Plc
Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2023
6 months 6 months 12 months
to 31 Dec 2023 to 31 Dec 2022 to 30 June 2023
Unaudited Unaudited Audited
note £'000s £'000s £'000s
Profit for the period 6,036 6,480 12,595
Other comprehensive (expense)/income
Items that may be subsequently reclassified to
profit and loss:
Exchange differences on translating foreign operations (42) (43) (38)
Total comprehensive income attributable to:
Owners of the parent 4 5,994 6,437 12,557
Dotdigital Group Plc
Consolidated Statement of Financial Position
As at 31 December 2023
Note As at As at As at
31 Dec 2023 31 Dec 30 June
2022 2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Assets
Non-current assets
Goodwill 8 22,175 9,680 9,680
Intangible assets 37,236 18,631 19,860
Property, plant and equipment 2,276 2,905 2,696
61,687 31,216 32,236
Current assets
Trade and other receivables 17,050 12,970 15,261
Cash and cash equivalents 37,149 49,574 52,676
54,199 62,544 67,937
Total assets 4 115,886 93,760 100,173
Equity attributable to the owners of the parent
Called up share capital 10 1,536 1,496 1,496
Share premium 12,786 7,124 7,124
Reverse acquisition reserve (4,695) (4,695) (4,695)
Other reserves 2,225 2,063 2,591
Retranslation reserve 216 253 258
Retained earnings 80,292 70,345 73,536
Total equity 92,360 76,586 80,310
Dotdigital Group Plc
Consolidated Statement of Financial Position
As at 31 December 2023
As at As at As at
31 Dec 2023 31 Dec 2022 30 June 2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Liabilities
Non-current liabilities
Lease liabilities 1,153 1,426 1,321
Deferred tax 6,688 2,853 2,644
7,841 4,279 3,965
Current liabilities
Trade and other payables 14,743 11,931 14,629
Lease liabilities 634 832 823
Current tax payable 308 132 446
15,685 12,895 15,898
Total liabilities 23,526 17,174 19,863
Total equity and liabilities 115,886 93,760 100,173
Dotdigital Group Plc
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2023
Share Share Reverse Other Re-translation Retained Total
capital premium Acquisition reserves Reserve Earnings
Reserve
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
As at 1 July 2022 1,496 7,124 (4,695) 2,005 296 63,582 69,808
Profit for the period - - - - - 6,480 6,480
Retranslation reserve - - - - (43) - (43)
Reserve Transfer - - - (283) - 283 -
Deferred tax on share options - - - - 79
79 -
Share based payments - - - 262 - - 262
As at 31 December 2022 1,496 7,124 (4,695) 2,063 253 70,345 76,586
As at 1 January 2023 1,496 7,124 (4,695) 2,063 253 70,345 76,586
Profit for the period - - - - - 6,115 6,115
Dividends - - - - - (2,926) (2,926)
Retranslation reserve - - - - 5 - 5
Reserve Transfer - - - (2) - 2 -
Deferred tax on share options - - - 71 - - 71
Share based payments - - - 459 - - 459
As at 30 June 2023 1,496 7,124 (4,695) 2,591 258 73,536 80,310
As at 1 July 2023 1,496 7,124 (4,695) 2,591 258 73,536 80,310
Profit for the period - - - - - 6,036 6,036
Retranslation reserve - - - - (42) - (42)
Issue of share capital 40 5,662 - - - - 5,702
Reserve transfer - - - (720) - 720 -
Deferred tax on share options - - - 6 - - 6
Share based payments - - - 348 - - 348
As at 31 December 2023 1,536 12,786 (4,695) 2,225 216 80,291 92,360
Dotdigital Group Plc
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2023
- Share capital is the amount subscribed for shares at nominal value.
- Share premium represents the excess of the amount subscribed for Share
Capital over the nominal value net of the share issue expenses.
- Retained earnings represents the cumulative earnings of the Group
attributable to equity shareholders.
- The reverse acquisition reserve relates to the adjustment required to
account the reverse acquisition in accordance with International Financial
Reporting Standards.
- Other reserves relate to the charge for the share-based payments in
accordance with International Financial Reporting Standard 2. The reserve
transfer in the period relates to lapsed share options.
- Retranslation reserve relates to the retranslation of a foreign subsidiary
into the functional currency of the Group.
Dotdigital Group Plc
Consolidated Statement of Cash Flows
For the six months ended 31 December 2023
6 months 6 months 12 months
to 31 Dec 2023 to 31 Dec 2022 to 30 June 2023
Unaudited Unaudited Audited
note £'000s £'000s £'000s
Cash flow from operating activities 9 9,078 10,569 21,985
Tax paid (1,295) (440) (1,119)
Net cash generated from operating activities 7,783 10,129 20,866
Cash flow from investing activities
Purchase of subsidiary net of cash acquired (18,325) - -
Additional consideration for repayment of debts at acquisition (607) - -
Purchase of intangible fixed assets (4,365) (3,989) (8,760)
Purchase of property, plant and equipment (65) (178) (306)
Interest received 608 214 895
Net cash used in investing activities (22,754) (3,953) (8,171)
Cash flows from financing activities
Equity dividends paid - - (2,926)
Payment of leasing liabilities (493) (455) (917)
Interest paid (27) (23) (57)
Proceeds from share issues 6 - -
Net cash used in financing activities (514) (478) (3,900)
(Decrease)/Increase in cash and cash equivalents (15,485) 5,698 8,795
Cash and cash equivalents at beginning of period 52,676 43,919 43,919
Effect of foreign exchange rate changes (42) (43) (38)
Cash and cash equivalents at end of period 37,149 49,574 52,676
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
1. GENERAL INFORMATION
Dotdigital Group Plc is a company incorporated in England and Wales and quoted
on the AIM market.
2. BASIS OF INFORMATION
These consolidated interim financial statements have been prepared in
accordance with UK-adopted International Accounting Standards ('IAS') and on a
historical basis, using the accounting policies which are consistent with
those set out in the Group's annual report and accounts for the year ended 30
June 2023. The interim financial information for the six months to 31 December
2023, which complies with IAS 34 'Interim Financial Reporting' has been
approved by the Board of Directors on 4 March 2024.
The unaudited interim financial information for the period ended 31 December
2023 does not constitute statutory accounts within the meaning of Section 435
of the Companies Act 2006. The comparative figures for the year ended 30 June
2023 are extracted from the statutory financial statements which have been
filed with the Registrar of Companies and contain an unqualified audit report
and did not contain statements under Section 498 to 502 of the Companies Act
2006.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 30 June 2023, as described in those
financial statements.
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
4. SEGMENTAL REPORTING
The Group's single line of business is the provision of data-driven
omnichannel marketing automation. The chief operating decision maker considers
the Group's reportable segments to be by geographical location this being
EMEA, US and APAC operations as shown below:
Geographical revenue and results
6 months to 31 December 2023
EMEA US APAC
Operations Operations Operations Total
£'000s £'000s £'000s £'000s
Income statement
Revenue 29,295 5,853 3,597 38,745
Gross profit 22,247 5,232 3,244 30,723
Profit/(Loss) before income tax 7,073 524 (215) 7,382
Total comprehensive income attributable to the owners of the parent 5,721 504 (231) 5,994
Financial position
Total assets 105,785 7,087 3,014 115,886
Net current assets 32,025 4,678 1,811 38,514
6 months to 31 December 2022
EMEA US APAC
Operations Operations Operations Total
£'000s £'000s £'000s £'000s
Income statement
Revenue 25,342 5,520 2,960 33,822
Gross profit 19,205 4,942 2,622 26,769
Profit/(Loss) before income tax 7,147 603 (334) 7,416
Total comprehensive income attributable to the owners of the parent 6,217 608 (388) 6,437
Financial position
Total assets 86,146 4,849 2,765 93,760
Net current assets 44,251 3,944 1,454 49,649
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
4. SEGMENTAL REPORTING (CONTINUED…)
6 months to 31 December 2022
EMEA US APAC
Operations Operations Operations Total
£'000s £'000s £'000s £'000s
Income statement
Revenue 25,342 5,520 2,960 33,822
Gross profit 19,205 4,942 2,622 26,769
Profit/(Loss) before income tax 7,147 603 (334) 7,416
Total comprehensive income attributable to the owners of the parent 6,217 608 (388) 6,437
Financial position
Total assets 86,146 4,849 2,765 93,760
Net current assets 44,251 3,944 1,454 49,649
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
4. SEGMENTAL REPORTING (CONTINUED…)
12 months to 30 June 2023
EMEA US APAC
Operations Operations Operations Total
£'000s £'000s £'000s £'000s
Income statement
Revenue 52,338 10,862 6,028 69,228
Gross profit 39,773 9,702 5,402 54,877
Profit/(Loss) before income tax 14,067 921 (602) 14,386
Total comprehensive income
attributable to the owners of the parent 12,522 686 (651) 12,557
Financial position
Total assets 95,742 4,170 261 100,173
Net current assets/(liabilities) 50,620 2,647 (1,228) 52,039
5. DIVIDENDS
The proposed final dividend of £3,065,980 for the year ended 30 June 2023 of
1.00p per share was paid on the 31 January 2024.
6. EARNINGS PER SHARE
Earnings per share data is based on the consolidated profit using 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.
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
6. EARNINGS PER SHARE (CONTINUED…)
A number of non-IFRS adjusted profit measures are used in the annual report
and financial statements and in these interim 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 6 months to 31 December 2023 6 months 12 months to 30 June 2023
share are as follows:
to 31 December 2022
£'000s £'000s £'000s
Profit for the year attributable to the owners of the parent 6,036 6,480 12,595
Amortisation of acquisition-related intangible fixed asset 571 60 120
Other exceptional costs 629 - 114
Share-based payment 364 262 736
Adjusted profit for the year attributable to the owners of the parent 7,600 6,802 13,565
Management does not consider the above adjustments to reflect the underlying
business performance.
6 months 6 months 12 months
to 31 Dec 2023 to 31 Dec 2022 to 30 June 2023
Unaudited Unaudited Audited
Earnings per Ordinary share:
Basic (pence) 1.99 2.17 4.21
Diluted (pence) 1.95 2.13 4.11
Adjusted basic (pence) 2.50 2.27 4.53
Adjusted diluted (pence) 2.46 2.23 4.43
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
6. EARNINGS PER SHARE (CONTINUED…)
to 31 Dec 2022 to 30 June 2022
to 31 Dec 2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Profit for the period
for the purpose of earnings
per share: 6,036 6,480 12,595
Basic 7,600 6,802 13,565
Adjusted
Weighted average number of shares in issue as follows:
6 months 6 months 12 months
to 31 Dec to 31 Dec 2022 to 30 June 2023
2023
Unaudited Unaudited Audited
Weighted average number
Basic 303,546,425 299,216,130 299,216,130
Diluted 309,341,173 304,819,814 306,435,606
The adjusted profit for the period, adjusted basic earnings per ordinary share
and adjusted diluted earnings per ordinary share exclude exceptional costs
£1,200,000 (FY22: £60,000, FY23: £234,000) and share based payments
£364,000 (FY22: £262,000, FY23: £736,000).
7. Exceptional costs
Exceptional costs relate to the amortisation of acquired
intangibles £571,000 (FY22: £60,000, FY23: £120,000), acquisition costs of
£477,000 (FY22: £nil, FY23 £100,000), Employers' NI on share option
exercise of £143,000 (FY22: £nil, FY23 £nil), and professional fees related
to the valuation of share options of £9,000 (FY22: £nil, FY23 £14,000).
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
8. GOODWILL
As at As at As at
31 Dec 31 Dec 30 June
2023 2022 2023
Unaudited Unaudited Audited
Group £'000s £'000s £'000s
Cost
At beginning of period 13,192 13,192 13,192
Additions 12,495 - -
At end of period 25,687 13,192 13,192
Amortisation
At beginning of period 3,512 3,512 3,512
Impairment - - -
At end of period 3,512 3,512 3,512
22,175 9,680 9,680
Net book value at end of period
On the 11 September 2023, the Group acquired all the voting rights of Fresh
Relevance Limited for a purchase consideration of £18.8m in cash and £5.7m
in shares in exchange for all Fresh Relevance Limited shares. Further
consideration of £0.6m was paid at acquisition to aid Fresh Relevance Limited
in the repayment of debt.
The Directors believe the acquisition will:
- Accelerate Dotdigital's CXDP roadmap, bringing highly
complementary cross-channel personalisation and website technology together
with technical expertise.
- Increase the Group's addressable market, enabling the
acquisition of higher value customers and supporting customer retention by
providing the means to expand its role in existing customers' technology
stacks.
- Add over £6.0m of annual revenues, of which 93% are
recurring SaaS revenue, and £0.6m annual EBITDA before integration costs.
- Create revenue and cost synergies over the medium term
and is expected to be earnings enhancing in the financial year ending 30 June
2025.
Goodwill of £12.5m was recognised on the acquisition, being the excess of the
purchase consideration over the provisional fair value of net assets acquired
as set out below.
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
8. GOODWILL (CONTINUED…)
The provisional assets and liabilities recognised as a result of the
acquisition are as follows:
Fair value of assets acquired (provisional)
£'000s
Assets
Non-current assets
Intangibles assets 17,129
Property, plant and equipment 22
17,151
Current assets
Trade and other receivables 792
Tax Asset 118
Cash and cash equivalents 498
1,408
Total assets 18,559
Liabilities
Non-current liabilities
Deferred tax 3,974
3,974
Current liabilities
Trade and other payables 2,561
2,561
Total liabilities 6,535
Total fair value of assets acquired 12,024
Goodwill 12,495
Total consideration 24,519
Acquisition costs of £0.5m were recognised in the Consolidated Income
Statement under exceptional costs.
In accordance with IFRS 3 'Business Combinations', the acquisition accounting
will be finalised within 12 months of the acquisition date of 11 September
2023.
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
9. RECONCILIATION OF PROFIT BEFORE INTEREST AND CORPORATION TAX TO NET CASH
GENERATED FROM OPERATIONS
6 months 6 months 12 months
to 31 Dec to 31 Dec 2022 to 30 June 2023
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Profit before tax from all operations 7,382 7,416 14,386
Adjustments for:
Depreciation 525 535 1,035
Amortisation 4,123 3,038 6,578
Loss on disposal of fixed assets - 18 38
Share-based payments 348 262 721
Finance lease non-cash movement 118 159 326
Net finance expense (581) (191) (838)
(Increase)/decrease in trade and other receivables (997) 55 (2,236)
(Decrease)/increase in trade and other payables (1,840) (723) 1,975
Net cash from operations 9,078 10,569 21,985
10. CALLED UP SHARE CAPITAL
During the period ended 31 December 2023, 8,041,830 Ordinary Shares of £0.005
per share (FY22: nil, FY23: nil) were issued.
The issued share capital as at 31 December 2023 was 307,257,960 Ordinary
Shares of £0.005 per share (2022: 299,216,130 Ordinary Shares of £0.005 per
share, FY23: 299,216,130 Ordinary Shares of £0.005 per share).
Dotdigital Group Plc
Notes to interim financial statements
For the six months ended 31 December 2023
11. RELATED PARTY NOTE
Transactions between the company and its subsidiaries, who are related
parties, have been eliminated on
consolidation and are not disclosed in this note.
Key management remuneration:
Key management include Directors and non-executive Directors
The remuneration paid for key management for employee services are as follows:
12 months
6 months 6 months to 30 June 2023
to 31 Dec 2023
to 31 Dec 2022
Unaudited Unaudited Audited
£'000s £'000s £'000s
Aggregate emoluments 401 363 1,191
Share-based payments on the LTIP options granted 114 86 248
Company contributions to money purchase pension scheme 13 12 22
528 461 1,461
Performance Share Plan (PSP) awards granted to Milan Patel on 21 December 2020
over 306,728 shares will partially vest (currently estimated to be between 25%
to 35% of maximum potential) against the relative three-year total shareholder
return and earnings per share targets. Full details of the actual performance
against the targets and number of shares vesting will be set out in next
year's Directors' Remuneration Report.
During the year ended 30 June 2023, the Chief Executive Officer was granted a
PSP award over 600,379 shares while the Chief Finance Officer was granted an
award over 276,490 PSP shares. These become exercisable subject to continued
service and the Company's relative three-year total shareholder return and
earnings per share in respect of the year ending 30 June 2025.
12. SUBSEQUENT EVENTS TO 31 DECEMBER 2023
As at the date of these statements and the date they were approved by the
Board of Directors there were no such events to report.
Copies of this interim statement are available form the Company at its
registered office at, No 1 London Bridge London, SE1 9BG. The interim
financial information document will also be available on the Company's website
www.dotdigitalgroup.com.
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