REG - dotDigital Group plc - Trading Update <Origin Href="QuoteRef">DOTD.L</Origin>

dotDigitalAnnouncement

16/07/2015 15:13

RNS Number : 9252S
dotDigital Group plc
14 July 2015
FOR IMMEDIATE RELEASE  14 JULY 2015
dotdigital Group Plc
("dotdigital", the "Company" or the "Group")
TRADING UPDATE
Year Ended 30 June 2015
A year of further strong organic and international growth
dotdigital Group Plc (AIM:DOTD), the leading provider of intuitive Software as a Service ("SaaS") and managed services to digital marketing professionals, providesan unaudited trading update for its financial year ended 30June 2015, ahead of its full year results which are expected to be announced in October 2015.
The Board is pleased with another year of profitable growth.
For the 10th year in succession revenues have grown in excess of 30% and the board anticipates that full year EBITDA* will be slightly ahead of market expectations.
This performance is a result of continued strong organic growth in the Company's high margin recurring revenue streams from its dotmailer platform both in the UK and internationally.
Financial Highlights
 Revenues for the 12 month period grew by approximately 31.5% to 21.3m.
 EBITDA* will be slightly ahead of market guidance.
 Strong cash generation with a cash balance of 12.3m at the end of the period.
 Growth in overseas revenues of 106%
A summary of revenues by region for the full year to 30 June 2015 is provided below:
12 Months ended 30 June 2014
12 Months ended 30 June 2015
Growth
UK
14.7m
18.2m
23.9%
International
1.5m
3.1m
106.0%
Total
16.2m
21.3m
31.5%
(* EBITDA is the profit before tax adjusted for depreciation, amortisation, finance income, finance expenses relating to share option schemes)
Email Marketing and Multi Channel Marketing Automation Software - SaaS Product
Revenue performance, which grew in line with expectations, was driven by strong growth of approximately 31.5% across the Company's core high margin email marketing SaaS platform.
This strong organic growth was underpinned by a combination of successful new client wins, particularly in the small enterprise and mid-market sectors and, in particular, amongst Magento platform users. There has also been healthy growth in recurring revenue from existing clients, and the Company has signed up a higher proportion of clients under contracts than in the previous period. 
The Company continues to win notable clients in both in the B2B and B2C sectors and in the past year these included: Honeywell, Unison, Ordnance Survey, The All England Lawn Tennis and Croquet Club, Knight Frank, Sony Music, Links of London, Sole Trader, Ladbrokes and Natural History Museum.
The Company has also seen a strong performance from its enabling professional services offerings with an increase in revenue from 1.8m to approximately 2.8m, an increase of 56%year on year with margins in the region of 60%. The directors expect this growth to continue as the Company has recently introduced a range of new productised services offerings allowing clients to kickstart their marketing automation programs.
International Growth
Revenues from the United States performed strongly, increasing from US$1.4m to approximately US$3.0m, an increase of over 114% compared to the same period last year. The East Coast sales office, located in New York, continues to focus on sector niches including Magento platform users and higher value small enterprise clients. As a result the Company has secured a number of new clients, including:
 Simple Human - Designers and manufacturers of houseware products in the USA, using the Magento eCommerce platform;
 La Vie en Rose - Online lingerie specialists throughout North America, using the Magento eCommerce platform;
 Alex Woo - Online fine jewellery retainer, using the Magento eCommerce platform; and
 Team Velocity Marketing - The company is the US's largest specialist automotive marketing agency which focuses on providing sales and service programmes to 18 of the world's top automotive manufacturers and over 75% of the top 100 dealerships in the US.
The Company has also made good early progress in the newly formed Asia Pacific region with strong partner relationships in Australia and solid revenue pipelines building through these channels. 
Magento
The quality of dotdigital's connector into the Magento eCommerce Platform and the Company's ability to build strong relationships with Magento partners has resulted in significant increased revenues during the year.
The number of the Company's clients now using dotmailer's Magento Connector has more than doubled during the financial year ended 30 June 2015. The average monthly recurring revenue spend for a typical Magento customer has also grown to approximately 1,070per month, a 48% increaseon last year.
Magento Connector clients now include: 
 The Royal Trust Collection;
 Fred Perry;
 World Duty Free;
 Hornby
The Company has signed a number of Magento Systems Integration partners as resellers for our platform, including Gorilla, a Gold Magento Solution Partner and named as Magento's Omni channel Partner of the Year in April 2015.
Cash Generation
The Company continues to be highly cash generative with cash at the end of the period of 12.3m, an increase of 32% on the prior year (2014: 9.3m). This is after capital expenditure and product development of 2.3m in the period. The Company continues to be debt free.
Highly efficient cash collection processes, combined with a high number of clients paying by direct debit, contributed to the Company's strong balance sheet at the year end.
Update on change of CEO
After a two year term as Non-Executive Director, Simone Barratt was appointed Deputy CEO in October 2014 and took over the CEO role on 24th February 2015. Peter Simmonds stepped down as Deputy CEO on 30th June 2015 but remains on the Board as a non-executive director.
Strategy Update
The core UK business is showing solid growth as the Company continues to win market share from its competitors as, what the directors believe to be, the powerful dotmailer feature set, combined with its ease of use and ease of integration, gives the Company a clear differentiator from its main competitors.
The returns the Company has seen from this year's investment in the US gives the directors confidence for the coming year and validates the Company's plans to strengthen its presence and open further sales offices in the US.
The company continues to focus on targeting fast growing small enterprise and medium sized businesses both in the B2B and B2C sectors. This approach has seen the Company's average monthly spend by client increase by approximately 41% from 315 in the prior financial year to 445. This, combined with a focus on longer term contracts (93% of clients that signed up in the year are on contracts between 12 - 24 months)and client retention, has resulted in higher client lifetime values.
Outlook
The dotmailer email marketing and multi-channel marketing automation platform continues to perform very strongly in both the B2C and B2B sectors. The Group also plans to continue developing its partner network, particularly in overseas markets.
At the end of June the Company appointed Anup Khera to the role of SVP Global Sales. Anup will be based in the UK and has considerable sales leadership experience in the email marketing/marketing automation space.
The marketing initiatives to build the Company's US presence are delivering a strong pipeline of new clients particularly in the small enterprise and mid-size online retail space, in particular Magento eCommerce users, which will continue to be a key focus for the financial year ending June 2016.
Further growth in the US is also expected to come from new sales offices in the Mid West and West Coast. These offices will be located to mirror the concentrations of Magento Systems Integrators, allowing us to forge stronger relationships and to provide those Integrators with local support.
Rohan Lock who has headed the UK Sales team for six years has been appointed to run the Asia Pacific region, based in Australia. He has considerable experience of building an effective sales organisation in the UK and is expected to help the Group accelerate sales growth in this region. Early indications from the Asia Pacific region show strong interest from high value strategic channel partners and a growing pipeline. Under the leadership of the dedicated regional manager, the Company expects to grow this market and to expand the partner/channel network across the region.
A test marketing initiative in Latin America was formed with a strategic partner approximately 9 months ago. Early results from this pilot project are showing positive sales performance. Metrics such as 'trial to conversion' and 'cost of conversion to lifetime value' ratios are encouraging and the directors anticipate further growth from this region in 2015/16.
Channel partners and resellers are important for the Group's growth ambitions including further penetration into the US as well as for entering new markets. To this end the Company plans to appoint a Global Channel Sales Director who will be based in the US. There have been a number of acquisitions in the email marketing sector and the directors believe this has left a number of resellers unhappy with their new partner relationships. As a result, the directors believe this has created an opportunity for dotmailer to replace their current platform. 
The ongoing investment in product development and the resulting new multichannel marketing automation functionality launched in early 2015 has helped it build new revenues. This new functionality will also allow the Company to evolve its pricing model and increase both the quality and quantum of its revenues from clients. The Company has been test marketing a number of new pricing and product bundling options over recent months and expects this to make a contribution to future revenue.
In summary, the demand for email marketing and marketing automation continues to be strong both in the UK and internationally. The Board believes that the dotmailer platform, with its specialist connectors and the Company's specialist professional services, is well placed to continue to generate strong organic growth in revenue, not just in the UK but overseas as well.
Commenting on the trading update, dotdigital's Chief Executive Officer, Simone Barratt said:
"This strong performance is again extremely encouraging and illustrates that our organic growth strategy is working. We look forward to providing a full update on the year's trading together with greater detail on our future growth plans when we announce our full year results in October.
The transition between Peter Simmonds and myself has gone smoothly ensuringthe growth momentum and strategic direction of the business has been maintained.
I would like to take the opportunity to thank our staff for their tremendous enthusiasm, commitment and performance over the past year and our shareholders for their continued support."
For further enquiries please contact:
dotdigital Group Plc
Simone Barratt , CEO
Milan Patel, CFO
Tel: 020 8662 2777
Financial PR and Investor Relations
Lisa Baderoon
lisa.baderoon@dotdigitalgroup.co.uk
Tel: 07721 413 496
N+1 Singer
Shaun Dobson, Head of Corporate Finance
Alex Wright, Corporate Finance
Tel: 020 7496 3000
finnCap
Stuart Andrews, Corporate Finance
Tel: 020 7220 0500

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