REG - dotDigital Group plc - Final Results
17 November 2020
dotdigital Group plc
("dotdigital", "the Company" or "the Group")
Final Results
dotdigital Group plc (AIM: DOTD), the leading 'SaaS' provider of an omnichannel marketing automation and customer engagement platform, announces final audited results for the year ended 30 June 2020.
Highlights
·
Following continued strong performance, the Board now expects to deliver a greater rate of revenue growth this financial year versus current consensus expectations
·
Organic revenue from continuing operations grew 12% to £47.4m (2019: £42.5m)
·
Adjusted EBITDA from continuing operations grew 24% to £18.2m (2019: £14.7m)
·
Adjusted operating profit from continuing operations grew 11% to £13.1m (2019: £11.8m)
·
Adjusted EPS from continuing operations was 3.79p1 (2019: 3.88p)
·
Strong cash balance at 30 June 2020 of £25.4m (2019: £19.3m)
·
23% of customers are using more than one channel (2019: 19%)
·
ARPC continued its upward trend, growing 12% to £1,083 per month (2019: £966 per month)
·
Recurring revenue as a percentage of total revenue increased to 91%2 (2019: 89%)
·
The Board proposes to pay a final dividend of 0.83p per ordinary share, in line with its policy (2019: 0.67p)
·
dotdigital was independently rated as a "Strong Performer" in the 2020 Forrester Wave Email Marketing Services Providers Report
1 Decrease in adjusted EPS driven by the increased tax rate to 6% from 1%, despite increased profitability.
2 Recurring revenue includes contracted and non-contracted revenue
Geographic expansion
·
Growth across all regions, with revenue from outside the UK now constituting 31% of Group revenue (2019: 29%)
·
EMEA revenue grew 9% to £36.3m (2019: £33.5m)
·
Revenues from the US region were up 17% to US$10.5m (2019: US$9.0m)
·
Revenues from APAC grew 37% to AUS$5.2m (2019: AUS$3.8m)
·
Several senior hires to build our international presence and increase management bandwidth
Product innovation
·
Recurring revenues derived from enhanced product functionality grew 16% to £14.4m (2019: £12.4m)
·
Continued R&D investment during the period to drive further value from our platform
·
Encouraging progress seen in increasing the number of customers using our newer features, such as SMS and Live Chat
Strategic partnerships
·
Progress made in deepening all strategic partner relationships, with sales through connectors increasing 10% to £22.2m (2019: £20.3m)
·
Strong revenue growth in Magento partnership, increasing 10% to £13.0m (2019: £11.8m), driven by enhanced brand awareness and product innovation
·
Further developed relationships with Shopify and Big Commerce, with Shopify customers growing to 83 at the end of the period (2019: 56)
·
Continued investment in Microsoft Dynamics partnerships, with revenues from customers using the platform broadly flat at £3.8m, with the expectation of increased revenues in FY 20/21
Outlook
·
Revenue guidance for FY 20/21 increased on 20 October following strong Q1
·
This strong performance has continued into October and the Board now expects to deliver a greater rate of revenue growth this financial year versus current consensus expectations.
·
Increased investment to drive future revenue growth
·
Sales momentum and contracted, recurring revenue stream gives us a high level of confidence in meeting targets for the current financial year
Milan Patel, CEO of dotdigital, commented:
"The Group responded remarkably well to the outbreak of COVID-19 at the end of the third quarter, as reflected in our results for the year, which show double digit growth and tangible progress made against all three of our strategic pillars despite the disruption.
While the pandemic has clearly been a time of heightened uncertainty for many organisations in our end markets, the Group's strong performance demonstrates a continued recognition of the value of our platform and the customer engagement benefits it provides as consumer needs and behaviours evolve and shift in response to government guidance and restrictions.
Moving forwards, we remain focused on expanding our international footprint, strengthening our product suite, and deepening our relationships with partners. We will continue to monitor and respond to the pandemic as it develops, but having made a positive start to FY 20/21 and with encouraging momentum in the business, we are confident in our ability to deliver another year of substantial growth and good progress against our strategy."
The Company's final results investor presentation can be found here:
An overview of the final results from Milan Patel, CEO, and Paraag Amin, CFO, is available to watch here: https://bit.ly/DOTD_FY20_overview.
For further information please contact:
dotdigital Group Plc
Milan Patel, CEO
Paraag Amin, CFOTel: 020 3953 3072
InvestorRelations@dotdigital.com
Alma PR (Financial PR)
Josh Royston
David Ison
Kieran Breheny
Tel: 020 3405 0210
dotdigital@almapr.co.uk
Canaccord Genuity (Nominated Advisor and Joint Broker)
Bobbie HilliamGeorgina McCooke
Jonathan Barr, Sales
Tel: 020 7523 8000
finnCap (Joint Broker)
Stuart Andrews, Corporate Finance
Alice Lane, ECMRhys Williams, Sales
Tel: 020 7220 0500
N+1 Singer (Joint Broker)
Shaun Dobson, Head of Corporate FinanceAlex Bond, Corporate Finance
Tel: 020 7496 3000
Prior to this announcement's release, the statement contained inside information for the purposes of Article 7 of Regulation (EU) 596/2014 (MAR) (Market Abuse Regulation).
Chairman's Statement
Overview
One of dotdigital's key strengths is its contracted recurring revenue model and there can be few more rigorous stress tests for it than the outbreak of a global pandemic. From the onset we have adapted well and delivered a strong set of results with progress made against all of our strategic pillars despite the disruption in Q4.
Our continued double-digit revenue growth clearly demonstrates the value that organisations attach to our platform which, for many, has been a vital tool for continuing to drive sales and maintain customer engagement through the time of the pandemic.
It remains difficult to predict how the pandemic will play out, but we have shown our ability to weather the most challenging of commercial environments. There is no room for complacency but having started the new financial year well, and with demand for our products continuing to grow, we can look to the future with measured confidence.
The strong fundamentals of the business have been vital in navigating the situation, but it is our colleagues that have been the driving force behind our continued progress. On behalf of the Board I would like to thank them all for their efforts.
Strategic progress
2019/20 represents the first full financial year since the Group and its platform were rebranded as dotdigital and Engagement Cloud respectively to reflect better the complementary, omnichannel nature of the offering. The progress the Group has made since that pivot in strategy - both in building out the product and expanding its reach to new and exciting markets around the world - has been remarkable. As a relative newcomer to the business, I have been hugely impressed by the ability of our teams to meet the evolving needs of marketeers in an increasingly digital world, underpinned by an unwavering commitment to innovation and an ambitious, supportive and inclusive company culture.
As a result of a lot of hard work, we now have one of the most comprehensive, easy-to-use, reliable and secure digital marketing platforms available, and are constantly looking at ways in which we can enhance it further. Beyond email marketing, we now offer SMS, push notifications, live chat and social ad functionality all in one solution. The global appeal of the omnichannel platform is evident from the increase in the contribution of non-UK sales this year.
In further validation of the strategic developments that have taken place at dotdigital in the past two years, the Company was for the first time recognised as a "strong performer" by Forrester in its Email Marketing Service Providers Q2 2020 report. As one of the "13 providers that matter most", the report said dotdigital "presented itself for the first time in this study as earnest, honest, and winning clients at a rate unmatched by all of its larger competitors… Marketers who sell direct in their emails should consider this marketing cloud alternative". As an influential voice in the industry, this award is an important endorsement of our competitive edge in the space.
People
Despite the challenging economic backdrop, we continued to hire through the year to support our growth ambitions. While we have strengthened teams across the Group, we have been most active in recruiting to build out an already exceptional international team, ensuring we have the very best senior talent available with knowledge and experience of working in specific overseas markets. More detail is available in the geographic progress section of the Chief Executive's Review.
At board level, I joined in January of this year as Non-Executive Chairman, having spent more than 35 years working with listed companies with a focus on software and technology. In May, we welcomed Liz Richards to the Board as Independent Non-Executive Director and Chair of the Audit Committee. Liz has had a highly successful career as CFO and Chair of Audit and brings with her a wealth of PLC experience that will be of great benefit to the Group.
Moving forward, we will continue to hire in line with our international expansion plans, adding new skills and increasing management bandwidth where necessary, while also investing in the development of our existing colleagues around the world.
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 2020, the Board proposes that the Group will pay a final dividend of 0.83p per ordinary share (2019: 0.67p).
Chief Executive's Review
Overview
The Group delivered organic revenue growth from continuing operations of 12% to £47.4m (2019: £42.5m) and adjusted EBITDA growth of 24% to £18.2m. Recurring revenues represented 91% of overall Group revenues (2019: c.89%), of which c.90% is contracted, giving good visibility. Recurring revenues derived from enhanced product functionality grew by 16% to £14.4m (2019: £12.4m), an important indicator of the value created by our focused R&D programme. The Group is cash generative and maintains a strong balance sheet with no debt and net cash balances of £25.4m at year end (2019: £19.3m), giving the Group scope to continue to invest in order to drive long-term, sustainable growth.
During the year, the platform's average revenue per customer (ARPC) continued its upward trend, growing by 12% from approximately £966 per month to £1,083 per month. This was largely the result of increased spend, both from additional messaging and additional functionality being used to drive a more personalised experience, along with signing up larger customers. Overall, the volume of messages sent out by the platform increased by 28% to 21.1bn from 16.5bn in 2019, reflecting both an increase in existing customer message volume growth and message volume growth from the new customers that we added during the year.
Impact of COVID-19
As a business, we transitioned quickly and smoothly to working from home. There was minimal operational impact, with all our teams, from engineers and customer support to sales and marketing, continuing to function at full capacity.
As previously reported, in the early stages of the pandemic we saw a slowdown of new business wins as decision making took longer for prospects. This mainly had an impact on sales in April, but at the same time we saw a reduction in churn, and trading improved on a monthly basis through to the end of the financial year. Our platform is sector and geography agnostic, and we saw the benefits of the diversity of our customer base throughout the pandemic, faring better than some of our peers with more concentrated end markets. The strong contracted recurring nature of our business model and our disciplined approach meant that cash collection remained robust throughout the year.
We retained all our colleagues during the pandemic, and none were furloughed, reflecting the continued high levels of demand for our platform and the confidence we have in the financial strength of the business.
Market
There is no doubt pandemic-related lockdowns and travel restrictions have accelerated the general trend towards digitalisation. Reporting strong top line growth in its Q3 results at the end of April on the back of accelerated adoption of its Teams communication and collaboration platform, Microsoft CEO Satya Nadella said the pandemic had driven "two years' worth of digital transformation in two months".
Perhaps not to the same extreme, a similar sentiment can be applied to the pandemic's impact on the marketing industry. Digital has been growing as a proportion of overall marketing budgets for some time, but the pandemic has meant that to continue cultivating leads and maintaining effective communication with customers, marketing teams - many of which had previously relied on face-to-face interactions - have had no choice but to make greater use of digital channels, with email taking on an increasingly significant role.
According to a recent survey of Fortune 1000 marketers by Chief Marketer, a leading content portal for marketers, email is now second only to social media as the most likely source of B2C conversion post-COVID, having taken significant share from in-person sales and live events. Respondents also reported a dramatic increase in the effectiveness of email as a source of B2C engagement. This is consistent with what we have been seeing, with healthy levels of new business acquisition from May onwards and more frequent and extensive use of email by existing customers.
We have also seen an increase in uptake of our omnichannel offering during the pandemic, with 23% of customers now using more than one channel. Organisations are keen to increase the number of touch points with customers and prospects against a backdrop of heightened economic uncertainty and reduced consumer spending. SMS revenues have increased significantly, and we have seen an increase in the number of customers making use of our real-time messaging capabilities such as in-browser live chat. We have also seen a trend towards an increase in the use of data-driven digital marketing, as marketing strategies become mature and customer-centric in ensuring they have a relevant and targeted message at every touchpoint between the customer or prospect and the brand.
Marketers will continue to shift and adapt their strategies as the recovery from COVID continues, but now more than ever organisations recognise the power of email and other digital marketing channels, and these are likely to remain vital components of marketing strategies around the world as we emerge from the crisis. dotdigital understands the evolving needs of its customers and is committed to continuing to develop and enhancing its platform to help them be successful.
Growth strategy
dotdigital's organic growth strategy continues to be focused around its three core pillars:
· Geographic progress
· Product innovation
· Developing strategic partnerships
Geographic progress
All regions grew during the period, with the success of our international expansion strategy evident in that revenue from outside the UK was 31% of Group revenue for the year, up from 29% in FY19. We expect this to trend to continue as we deploy more investment in international regions.
International expansion is a key tenet of our growth strategy and has been a significant area of investment in the period. We have continued to strengthen our presence and enhance our prospects across all territories, despite the challenges posed by the pandemic, and expect to see that flow through to an improved top line growth rate in our overseas businesses as we move into FY 20/21 and beyond.
EMEA
EMEA revenue grew 9% to £36.3m despite market uncertainties in the second half of the financial year. Sales cycles lengthened during the initial lockdown as prospects delayed technology decisions and existing customers delayed project completions. As lockdowns started to ease, we saw an uptick in momentum both from a pipeline and sales conversion perspective.
North America
Revenues from North America were up 17% to US$10.5m from US$9.0m in 2019. North America is a key growth market and we have invested heavily in the region, including the appointment of an experienced General Manager to lead an already strong team, create more management bandwidth and bring greater experience of growing companies in this region.
Our focus remains on growing relationships with partners to help us build our presence while increasing brand awareness. We made a great deal of progress on both fronts in the period - particularly with Dynamics, Microsoft's line of enterprise resource planning and customer relationship management software applications. In May, we hired a partner manager who has experience in the space to enhance our relationship. They have already made significant progress, giving us confidence of increased traction in the space moving forwards.
In the current financial year, we intend to hire more sales and marketing resource in the region to accelerate our expansion plans and help us achieve our scale ambitions.
APAC
APAC saw the highest levels of growth in the year, albeit from a smaller base, with revenues growing 37%, from AUS$3.8m in 2019 to AUS$5.2m. We continued to invest in our Singapore team in the period and expect to see numbers of customer sign-ups through partners and direct sales continue to increase as we build out our presence there.
Product innovation
Functionality recurring revenues in the period grew 16% to £14.4m (2019: £12.4m), illustrating continued growth in the uptake of enhanced features, increased use of data and demonstrating our ability to successfully drive more value from our platform.
R&D investment in the year was £6.5m (2019: £5.5m), consistent with management expectations. Despite the disruption caused by the pandemic in the second half, we continued to execute against our product strategy and our roadmap has continued to develop as anticipated.
Our areas of focus for continued product innovation remain as follows:
· Data and intelligence - joining all data together to create a single customer view and help our customers better target their campaigns from a personalisation perspective. We have dedicated a great deal of resource to this in response to increasingly sophisticated customer requirements and will continue to do so through FY 20/21, culminating in significant upgrades to the platform.
· Marketing automation - harnessing artificial intelligence and machine learning across targeted parts of the platform's architecture. This included the launch of sector-tailored product packages for commerce customers and enhanced product recommendations capabilities.
· Building out further omnichannel functionality - to assist businesses through the full customer journey at every touch point. This included the launch of a new live chat solution through the Engagement Cloud and additional SMS capabilities, with an increase in take-up of both in the period.
A further area of focus in the period has been our reporting and analytics capability. The level of recency, frequency, and monetary insight we can provide has been enhanced, allowing customers to better target individuals through the engagement curve.
Other key developments in the period include improving the end user interface, bolstering our transactional email and messaging capability for all of our integrations, and introducing concepts of loyalty into the platform.
Developing strategic partnerships
We have continued to invest in all our strategic partner relationships, which are important in raising brand awareness in the regions and verticals in which we integrate, and are pleased with the progress we have made in developing them and refining our joint go-to-market strategies. Sales through connectors into strategic partners increased 10% to £22.2m (2019: £20.3m).
At the same time, from a technical perspective, we have made marked progress in optimising our integrations through both improving our connectors, software architecture that models interactions with our strategic partners' respective platforms, and the rules that govern those interactions. The combination of these continues to improve conversion rates.
Enhanced brand awareness alongside the additional functionality we developed for e-commerce merchants drove further growth in the Magento space. Sign-up of customers through Magento in all regions remained strong - in the period we added 206 Magento customers to the platform, taking the total to 716 as at the end of June 2020. Revenue from Magento customers in the period grew 10% from £11.8m to £13.0m.
All new Magento users continue to ship as standard with dotdigital messaging capabilities and now also get our chat functionality pre-installed, providing marketeers an increased value proposition for their digital marketing strategies. The new functionality allows us to capture the online conversations for segmenting upon, for relevancy and better machine learning for product recommendations and marketing automation. The introduction of chat functionality allows us to add an additional source of lead generation from the Magento community. Our respective teams continue to work together on our joint marketing strategy and enhanced development of our integration.
At the end of the financial year, we had 83 customers using the Shopify connector versus 56 at the corresponding time last year. In the year, revenue from Shopify customers grew 36% from £0.9m to £1.2m. With the inclusion of the dotdigital platform in Shopify's Plus Certified App Program, which is intended to make it easier for Shopify Plus merchants to discover carefully selected, best-of-breed apps, and our relationship continues to go from strength to strength. In addition, we have seen an increasing pipeline resulting from the integration that 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 partner ecosystem to drive demand for the platform.
As Big Commerce's global elite partner, we continue to deepen our strategic relationship, formulating a joint go-to market plan through offers for e-commerce merchants, and joint marketing efforts to the user base. This will enable us to increase our addressable market across all regions, and we are already starting to see more customers using the integration as a result.
As previously mentioned, in May we hired a North American partner manager to build our strategic relationship with Microsoft for the integration of our platform into Dynamics 365, where we see a significant opportunity. Revenues from customers using our Dynamics connector were broadly flat at £3.8m in the period. We expect to see this grow in the current financial year as we begin to build on the strong foundations we have laid and take market share.
Current trading and outlook
As reported in the trading update published in October, the new financial year has started well with a strong first quarter sales performance driven by existing customer growth, new customer wins and significant take up of non-email channels.
This strong performance has continued into October and the Board now expects to deliver a greater rate of revenue growth this financial year versus current consensus expectations. The strong performance has been driven by continued take up of non-email channels, predominantly SMS, which is a lower margin product than email. The incremental margin will be reinvested in the business to drive future growth, in line with the previously stated strategy and the Board is confident on achieving consensus earnings and cash for the full year to 30 June 2021.
It is critical we remain alert to external factors and continue to monitor the international COVID-19 response closely, but with encouraging momentum in the business, good revenue visibility and continued strong cash generation, we find ourselves in a position of relative strength. Confident FY21 will be another year of substantial growth and good progress against our strategy.
Our balance sheet is in good shape and we intend to continue to invest in our platform to cement our market-leading position and ensure we continue to grow sustainably and profitably for many years to come.
I would like to take this opportunity to again thank all our colleagues around the world for the way they have responded to the events of the past few months. They have demonstrated exceptional levels of commitment and have worked tirelessly under unprecedented circumstances to ensure we continue to deliver a first-class service to our customers and move forward as a business.
Financial Review
Revenues
The Group achieved continuing operations revenue growth of 12% (2019: 15%), which delivered record overall revenues of £47.4m, despite the impact of the pandemic in the fourth quarter of our financial year. The quality of the revenue growth is evidenced by increased recurring revenues of 91%. The Group continued to grow internationally with revenues accounting for 31% of the total (2019: 29%).
Business model
The Group generates the majority of its revenues from annual message plans which are recognised equally over the life of the contract. In addition, we sell upgrade packages to customers allowing them to use additional modules and features of our platform. For more sophisticated customers we offer customised functionality and integrations so that they can maximise the use of their customer data. These professional services contracts are recognised as revenue as the work is performed. Over the past year we have built other messaging channels into our core platform, including SMS and Live Chat, and access to these channels are sold separately.
Gross margin
The gross margin for the period for continuing operations was 87% (2019: 90%). The decline in gross margin comes from the growth of non-email messaging channels, and in particular SMS. We continue to see value in both the direct and indirect models of selling in our international regions, and hence continue to invest in building long-term annuity revenues.
Operating expenses
Adjusted operating profit from continuing operations grew by 11% from £11.8m to £13.1m. Operating expenses as a percentage of revenues dropped from 62% to 59%, reflecting the growth in revenue. dotdigital continues to invest in people in the areas of development, sales and marketing, particularly within the regional offices, to continue enhancing and adding to the product suite.
Balance sheet
There was strong cash management in the year with net cash generated from continuing operations of £18.2m (2019: £13.3m). The cash balance at the end of the period was £25.4m (2019: £19.3m). The Group continues to be debt free and maintains a healthy balance sheet. A combination of a highly efficient cash collection process and an incentivisation push to move more customers onto Direct Debit and automated credit card collection helped with the year-end position.
Trade receivables have only grown by 8% in the year, reflecting revenue growth and good cash management. Overall receivables have grown 6% due to the deferment of marketing expenditure such as tradeshows and conferences which have been postponed due to Covid and deferred commission.
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 £6.5m from £5.5m in 2019.
Goodwill
£9.1m of goodwill reflects the acquisition of Comapi in 2017/18, for a cash consideration of £10.7m. Identifiable intangible assets included £1.2m of technology and £1.2m of customer relationships. The former has been fully amortised in the year. As the Comapi CPaaS technology was successfully fully integrated into the Engagement Cloud platform, this has now become part of the dotdigital offering, leading to goodwill reflecting the technology and know-how of the Engagement Cloud platform, as opposed to the discontinued operational part of Comapi.
Tax
Profitability from continuing operations continues to grow. This is reflected within the tax charge, which is now £0.8m with an effective tax rate of 6%, with a lower than standard rate due to enhanced R&D tax credits.
EPS
In the year the continued operations adjusted basic EPS was 3.84p (2019: 3.93p) and adjusted diluted EPS was 3.79p (2019: 3.88p). Despite a higher level of pre-tax profit, the decrease in adjusted EPS is driven by an increased tax rate of 6% (2019: 1%).
Dividend policy
As announced last year, the Board conducted its review of its organic business plan for the following three years. This included evaluating the cash needs required for opportunities in organic growth to increase shareholder value and capital expenditure. The Board decided that it will continue to keep a progressive dividend in line with EBITDA growth. Therefore, subject to approval at the AGM in December 2020, the Board proposes that the Group will pay a final dividend of 0.83 pence per ordinary share (2019: 0.67p); to be payable at the end of January 2021.
DOTDIGITAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2020
30.6.20
30.6.19
£'000
£'000
Notes
CONTINUING OPERATIONS
Revenue from contracts with customers
47,404
42,522
Cost of sales
7
(6,366)
(4,377)
Gross profit
41,038
38,145
Administrative expenses
7
(27,976)
(26,380)
OPERATING PROFIT FROM CONTINUING OPERATIONS PRE SHARE-BASED PAYMENTS AND EXCEPTIONAL COSTS
13,062
11,765
Share based payments
(682)
(565)
Exceptional costs
5
(136)
(179)
OPERATING PROFIT FROM CONTINUING OPERATIONS
12,244
11,021
Finance costs
6
(98)
-
Finance income
6
40
19
PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS
7
12,186
11,040
Income tax expense
8
(1,550)
(58)
Profit for the year from continuing operations
10,636
10,982
Loss for the year from discontinuing operations
12
(378)
(2,457)
Profit for the year attributable to the owners of the parent
10,258
8,525
Earnings per share from all operations (pence per share)
Basic
11
3.44
2.86
Diluted
11
3.39
2.82
Adjusted Basic
11
3.84
3.36
Adjusted Diluted
11
3.79
3.31
Earnings per share from continuing operations (pence per share)
Basic
11
3.57
3.68
Diluted
11
3.52
3.63
Adjusted Basic
11
3.84
3.93
Adjusted Diluted
11
3.79
3.88
Earnings per share from discontinued operations (pence per share)
Basic
11
(0.13)
(0.82)
Diluted
11
(0.13)
(0.81)
Adjusted Basic
11
(0.00)
(0.57)
Adjusted Diluted
11
(0.00)
(0.57)
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
30.6.20
30.6.19
£'000
£'000
Notes
PROFIT FOR THE YEAR
10,258
8,525
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations
34
(42)
Total comprehensive income attributable to:
Owners of the parent
10,292
8,483
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Comprehensive income from continuing operations
10,670
10,940
Comprehensive income from discontinued operations
(378)
(2,457)
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2020
30.6.20
30.6.19
£'000
£'000
Notes
ASSETS
NON-CURRENT ASSETS
Goodwill
13
9,680
9,680
Intangible assets
14
14,059
11,702
Property, plant and equipment
15
5,262
1,037
29,001
22,419
CURRENT ASSETS
Trade and other receivables
17
12,987
12,222
Cash and cash equivalents
18
25,383
19,320
38,370
31,542
TOTAL ASSETS
67,371
53,961
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital
19
1,493
1,490
Share premium
20
6,967
6,791
Reverse acquisition reserve
20
(4,695)
(4,695)
Other reserves
20
1,372
720
Retranslation reserve
20
50
16
Retained earnings
20
45,514
37,161
TOTAL EQUITY
50,701
41,483
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities
22
3,399
-
Deferred tax
24
2,169
1,377
5,568
1,377
CURRENT LIABILITIES
Trade and other payables
21
9,796
11,096
Financial liabilities:
- Interest bearing loans and borrowings
-
5
- Lease liabilities
22
1,068
-
Current tax payable
238
-
11,102
11,101
TOTAL LIABILITIES
16,670
12,478
TOTAL EQUITY AND LIABILITIES
67,371
53,961
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF FINANCIAL POSITION
30 JUNE 2020
30.6.20
30.6.19
£'000
£'000
Notes
ASSETS
NON-CURRENT ASSETS
Owned
Property, plant and equipment
3
-
Investments
16
15,142
15,147
15,145
15,147
CURRENT ASSETS
Trade and other receivables
17
797
808
Cash and cash equivalents
18
396
594
1,193
1,402
TOTAL ASSETS
16,338
16,549
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital
19
1,493
1,490
Share premium
20
6,967
6,791
Other reserves
20
1,372
720
Retained earnings
20
3,550
3,515
TOTAL EQUITY
13,382
12,516
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
21
2,956
4,033
TOTAL LIABILITIES
2,956
4,033
TOTAL EQUITY AND LIABILITIES
16,338
16,549
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Called up share
Retained
Share
capital
earnings
premium
£'000
£'000
£'000
Balance as at 1 July 2018
1,490
32,331
6,791
Issue of share capital
-
-
-
Dividends
-
(1,903)
-
IFRS 15 restatement
-
(2,837)
-
Deferred tax asset on IFRS 15
-
539
-
Transfer in reserves
-
506
-
Share-based payments
-
-
-
Transactions with owners
-
(3,695)
-
Profit for the year
-
8,525
-
Other comprehensive income
-
-
-
Total comprehensive income
-
8,525
-
Balance as at 30 June 2019
1,490
37,161
6,791
Issue of share capital
3
-
176
Dividends
-
(1,996)
-
IFRS 16 restatement
-
61
-
Transfer in reserves
-
30
-
Share-based payments
-
-
-
Transactions with owners
3
(1,905)
176
Profit for the year
-
10,258
-
Other comprehensive income
-
-
-
Total comprehensive income
-
10,258
-
Balance as at 30 June 2020
1,493
45,514
6,967
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
CONTINUED…
Retranslation
Reverse acquisition
Other
Total equity
reserve
reserve
reserves
£'000
£'000
£'000
£'000
Balance as at 1 July 2018
(26)
(4,695)
661
36,552
Issue of share capital
-
-
-
-
Dividends
-
-
-
(1,903)
IFRS 15 restatement
-
-
-
(2,837)
Deferred tax asset on IFRS 15
-
-
-
539
Transfer in reserves
-
-
(506)
-
Share-based payments
-
-
565
565
Transactions with owners
-
-
59
(3,636)
Profit for the year
-
-
-
8,525
Other comprehensive income
42
-
-
42
Total comprehensive income
42
-
-
8,567
Balance as at 30 June 2019
16
(4,695)
720
41,483
Issue of share capital
-
-
-
179
Dividends
-
-
-
(1,996)
IFRS 16 restatement
-
-
-
61
Transfer in reserves
-
-
(30)
-
Share-based payments
-
-
682
682
Transactions with owners
-
-
652
(1,074)
Profit for the year
-
-
-
10,258
Other comprehensive income
34
-
-
34
Total comprehensive income
34
-
-
10,292
Balance as at 30 June 2020
50
(4,695)
1,372
50,701
· Share capital is the amount subscribed for shares at nominal value.
· Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
· Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the share issue expenses.
· Retranslation reserve relates to the retranslation of foreign subsidiaries into the functional currency of the Group.
· The reverse acquisition reserve relates to the adjustment required to account for the reverse acquisition in accordance with International Financial Reporting Standards.
· Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2.
·
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Called up share
Retained
Share
Other
capital
earnings
premium
Reserves
Total equity
£'000
£'000
£'000
£'000
£'000
Balance as at 1 July 2018
1,490
5,761
6,791
661
14,703
Issue of share capital
-
-
-
-
-
Dividends
-
(1,903)
-
-
(1,903)
Transfer in reserves
-
506
-
(506)
-
Share-based payments
-
-
-
565
565
Transactions with owners
-
(1,397)
-
59
(1,338)
Profit for the year
-
(849)
-
-
(849)
Total comprehensive income
-
(849)
-
-
(849)
Balance as at 30 June 2019
1,490
3,515
6,791
720
12,516
Issue of share capital
3
-
176
-
179
Dividends
-
(1,996)
-
-
(1,996)
Transfer in reserves
-
30
-
(30)
-
Share-based payments
-
-
-
682
682
Transactions with owners
3
(1,966)
176
652
(1,135)
Profit for the year
-
2,001
-
-
2,001
Total comprehensive income
-
2,001
-
-
2,001
Balance as at 30 June 2020
1,493
3,550
6,967
1,372
13,382
· Share capital is the amount subscribed for shares at nominal value.
· Retained earnings represents the cumulative earnings of the Company attributable to equity shareholders.
· Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the share issue expenses.
· Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2.
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
30.6.20
30.6.19
£'000
£'000
Notes
Cash flows from operating activities
Cash generated from operations
29
15,907
12,493
Tax paid
(124)
(207)
Net cash generated from all operating activities
15,783
12,286
Net cash generated from continuing operating activities
18,214
13,288
Net cash generated from discontinued operating activities
(2,431)
(1,002)
Cash flows from investing activities
Purchase of intangible fixed assets
(6,505)
(5,617)
Purchase of tangible fixed assets
(277)
(456)
Interest received
40
19
Net cash flows used in investing activities
(6,742)
(6,054)
Net cash generated from continuing investing activities
(6,741)
(5,168)
Net cash generated from discontinued investing activities
(1)
(886)
Cash flows from financing activities
Equity dividends paid
(1,996)
(1,903)
Payment of lease liabilities
(1,127)
Loan repayments
-
(14)
Share issue
179
-
Net cash flows from financing activities
(2,944)
(1,917)
Net cash generated from continuing financing activities
(2,884)
(1,903)
Net cash generated from discontinued financing activities
(60)
(14)
Increase in cash and cash equivalents
6,097
4,315
Cash and cash equivalents at beginning of year
30
19,320
15,005
Effect of foreign exchange rate changes
(34)
-
Cash and cash equivalents at end of year
30
25,383
19,320
.
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
30.6.20
30.6.19
£'000
£'000
Notes
Cash flows from operating activities
Cash generated from operations
29
1,622
1,851
1,622
1,851
Net cash generated from operating activities
Cash from investing activities
Purchase of tangible fixed assets
(3)
-
Net cash flows from investing activities
(3)
-
Cash flows from financing activates
Equity dividends paid
(1,996)
(1,903)
Share issue
179
-
Net cash flows from financing activities
(1,817)
(1,903)
Increase in cash and cash equivalents
(198)
(52)
Cash and cash equivalents at beginning of year
30
594
646
Cash and cash equivalents at end of year
30
396
594
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
1. GENERAL INFORMATION
dotdigital Group Plc ("dotdigital") is a public limited company incorporated in England and Wales and quoted on the AIM Market.
2. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and those parts of Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.
The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and the IFRS Interpretations Committee effective at the time of preparing the financial statements.
New and amended standards adopted by the Company
The Group has applied IFRS 16 Leases for the first time for the year commencing 1 July 2019. The Group has applied the modified approach from 1 July 2019 but has not restated comparatives for the year ended 30 June 2019, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 July 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 2.7%.
For leases previously classified as finance leases, the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. These finance leases were not remeasured at the date of initial application as they are considered immaterial.
The associated right-of-use assets for property leases and other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 30 June 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
- reliance on previous assessments on whether leases are onerous
- the accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases
- the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date, the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a lease.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2. ACCOUNTING POLICIES - continued
New standards and interpretations not yet adopted
There are no standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
The financial statements are presented in sterling (£), rounded to the nearest thousand pounds.
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;
- Comparative numbers are prepared on the same basis.
The following accounting treatment has been applied in respect of the acquisition of dotdigital Group Plc:
- The assets and liabilities of dotdigital Group Plc are recognised and measured in the consolidated financial statements at their fair value at the date of acquisition.
- The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
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 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, at the time of approving the financial statements, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the Directors' report. The impact of COVID 19 is discussed within the CEO report and Risk section in the front end of the report.
Operating profit
Operating profit is stated after charging operating expenses but before finance costs.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:
- It is technically feasible to complete the intangible asset so that it will be available for use or resale;
- Management intends to complete the intangible asset and use or sell it;
- There is an ability to use or sell the intangible 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 from the point when the asset is available for use.
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Property, plant and equipment
Tangible non-current assets are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assets' carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits are associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is provided at the following rates in order to write off each asset over its estimated useful life and is based on the cost of assets less residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Right of use assets: 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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
Capital risk management
The Group manages its capital to ensure it is able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash equivalents and equity attributable to the owners of the parent as disclosed in the statement of changes in equity.
Taxation
The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Current tax
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the balance sheet date.
Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary difference will be utilised.
Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income asset is realised or deferred income tax liability is settled.
Leases
As described in note 1, the Group has applied IFRS 16 using the modified retrospective approach with effect from 1
July 2019 and therefore comparative information has not been restated. Comparative information is therefore still reported under IAS 17 and IFRIC 4.
Accounting policy applicable before 1 July 2019:
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership do not transfer to the lessee are charged to the income statement on a straight line basis over the period of the lease.
Accounting policy applicable from 1 July 2019:
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 July 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 2.7%.
For leases previously classified as finance leases, the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. These finance leases were not remeasured at the date of initial application as they are considered immaterial.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
2019
£'000s
Operating lease commitments disclosed as at 30 June 2019
5,370
Discounted using the incremental borrowing rate at 1 July 2019
5,760
Add: finance lease liabilities recognised as at 30 June 2019
5
Lease liability recognised as at 1 July 2019
5,765
Of which are:
Current lease liabilities
985
Non-current lease liabilities
4,780
5,765
The associated right-of-use assets for property leases and other right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 30 June 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
30 June
2020
1 July
2019
£'000s
£'000s
Properties
5,376
5,678
Motor vehicles
82
82
Total right-of-use assets
5,458
5,760
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
- Right-of-use assets - increased by £5,760,374
- Accruals and contract liabilities - decreased by £78,034
- Lease liabilities - increase by £5,760,374
- The net impact on retained earnings on 1 July 2019 was a decrease of £78,034
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for the year ended 30 June 2020 all increased as a result of the change in accounting policy. Lease liabilities are now included in segment liabilities, whereas finance lease liabilities were previously excluded from segment liabilities. The following segments were affected by the change in policy:
Adjusted Profit before income tax
Segment assets
Net current assets
£'000s
£'000s
£'000s
EMEA
11,109
61,016
25,905
US
666
4,857
845
APAC
(39)
1,574
(546)
11,736
67,447
26,204
Adjusted Profit before income tax
Segment assets
Net current assets
£'000s
£'000s
£'000s
Core
12,113
65,181
27,977
CPaaS
(377)
2,266
(1,773)
11,736
67,447
26,204
Adjusted earnings per share for all operations and for continuing operations decreased by 0.03p per share for the year to 30 June 2020 as a result of the adoption of IFRS 16. There was no impact on the adjusted earnings per share for discontinued operations for the year to 30 June 2020.
Practical expedients applied
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
- reliance on previous assessments on whether leases are onerous
- the accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases
- the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a lease.
The Group's leasing activities and how these are accounted for
The group leases various offices, equipment and cars. Rental contracts are typically made for fixed periods of 1 to 10 years but may have extension options as described in (i) below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Until 30 June 2019, leases of property, plant and equipment and cars were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the income statement on a straight-line basis over the period of the lease.
From 1 July 2019, 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 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 2020 were optional.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
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, 'available for sale' (AFS) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition.
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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
- Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.
- Trade receivables
Trade receivables are recognised initially at the lower of their original invoiced value and recoverable amount. A provision is made when it is likely that the balance will not be recovered in full. Terms on receivables range from 30 to 90 days.
- Financial liabilities and equity
Financial liabilities and equity are recognised on the Group's statement of financial position when the Group becomes a party to a contractual provision of an instrument. Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of transaction costs.
The Group's financial liabilities include trade payables and accrued liabilities.
- Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Terms on accounts payable range from 10 to 90 days.
Foreign currency risk
Currency risk is the risk that the holding of foreign currencies will affect the Group's position as a result of a change in foreign currency exchange rates. The Group has no significant foreign currency risk as most of the Group's financial assets and liabilities are denominated in functional currencies of relevant Group entities. Accordingly, no quantitative market risk disclosures or sensitivity analysis for currency risks have been prepared.
The results and 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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
Equity
Share capital is the amount subscribed for shares at their nominal value.
Share premium represents the excess of the amount subscribed for the share capital over the nominal value of the respective shares net of share issue expenses.
Retained earnings represent the cumulative earnings of the Group attributable to equity shareholders.
The reverse acquisition reserve relates to the adjustment required by accounting for the reverse acquisition in accordance with IFRS 3 'Business combinations'.
Other reserves relate to the charge for share-based payments in accordance with IFRS 2 'Share-based Payments'.
Share-based payments
For equity-settled share-based payment transactions the Group, in accordance with IFRS 2 'Share-Based Payments' measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. The fair value of those equity instruments is measured at the grant date using the trinomial method. The expense is apportioned over the vesting period of the financial instrument and is based on the number which is expected to vest and the fair value of those financial instruments at the date of grant. If the equity instruments granted vest immediately, the expense is recognised in full.
Functional currency translation
- Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (functional currency), which is mainly pounds sterling (£) 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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
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 and Polish Zloty currencies.
The following table 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.
30.6.20
30.6.19
£'000
£'000
US Dollar
55
77
Australian Dollar
7
34
Singaporean Dollar
(15)
(8)
Euro*
(22)
-
Belarusian Ruble
11
(2)
South African Rand
2
1
Polish Zloty
(15)
2
23
104
*there was no foreign currency exchange rate risk against the Euro in the prior year as dotdigital B.V was incorporated in September 2019.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Judgements
(a) Capitalisation of development costs
Our business model is underpinned by our email and data-driven omni--channel marketing automation platform, dotmailer. Internal activities are continually undertaken to enhance and maintain the product in a bid to stay ahead of our competition. Management review the work of developers during the period and make the following judgements:
-Internal work relating to product development is reviewed against IAS 38 criteria and will be capitalised if management feel the criteria have been met.
-Internal work relating to the maintenance of existing products is expensed to the income statement and accounted for in payroll costs.
(b) Valuation of intangibles
The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill and if negative, it is recognised in the consolidated income statement.
Judgement is required in determining the fair value of identifiable assets, liabilities and contingent assets and liabilities assumed in a business combination and the fair value of the consideration payable. Calculating the fair values involves the use of significant estimates and assumptions, including expectations about future cash flows, discount rates and the lives of assets following purchase.
Estimates and assumptions
(a) Estimated impairment of goodwill
The Directors have carried out a detailed impairment review in respect of goodwill. The Group assesses at each reporting date whether there is an indication that an asset may be impaired, by considering the net present value of discounted cash flow forecasts which have been discounted at 6.2%. 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
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
2.
ACCOUNTING POLICIES - continued
Further detail on the estimates and assumptions we make in our share-based compensation are included in note 27 to the financial statements. The charge made to income statement for period is also disclosed here.
(c) Depreciation and amortisation
The Group depreciates short leasehold, fixtures and fittings, computer equipment and amortises computer software, internally generated development costs and domain names on a straight-line method over the estimated useful lives. The estimated useful lives reflect the Directors' estimate of the periods that the Group intends to derive future economic benefits from the use of the Group's short leasehold fixtures and fittings, computer equipment, computer software, internally generated development costs and domain names.
(d) Bad debt provision
We perform ongoing credit evaluations of our customers and grant credit based upon past payment history, financial condition and anticipated industry conditions. Customer payments are regularly monitored and a provision for doubtful accounts is established based upon specific situations and overall industry conditions. Hence the provision is maintained for potential credit losses based upon management's assessment of the expected collectability of all accounts receivable. In making this assessment, management take into consideration (i) any circumstances of which we are aware regarding a customer's inability to meet its financial obligations and (ii) our judgements as to potential prevailing economic conditions in the industry and their potential impact on the Group's customers.
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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
3. SEGMENTAL REPORTING
dotdigital's single line of business remains the provision of data-driven omni-channel marketing automation. The chief operating decisionmaker 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 below:
Geographical revenue and results
30.6.2020
EMEA
US
APAC
Total
£'000
£'000
£'000
£'000
Income statement
Revenue
43,810
8,325
2,777
54,912
Gross profit
33,044
7,420
2,496
42,960
Profit/(loss) before income tax
11,256
598
(46)
11,808
Total comprehensive income attributable to the owners of the parent
10,098
291
(97)
10,292
Financial position
Total assets
60,959
4,846
1,566
67,371
Net current assets/(liabilities)
26,732
1,006
(470)
27,268
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 (2019: 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.
30.6.2019
EMEA
US
APAC
Total
£'000
£'000
£'000
£'000
Income statement
Revenue
42,215
6,957
2,113
51,285
Gross profit
32,039
6,099
1,926
40,064
Profit before income tax
5,672
2,812
389
8,873
Total comprehensive income attributable to the owners of the parent
5,441
2,657
385
8,483
Financial position
Total assets
52,100
1,717
144
53,961
Net current assets
16,771
2,938
732
20,441
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 (2018: 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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
Business activity revenue and results
30.6.2020
Core
CPaaS
Total
£'000
£'000
£'000
Income statement
Revenue
47,404
7,508
54,912
Gross profit
41,038
1,922
42,960
Profit/(loss) before income tax
12,186
(378)
11,808
Total comprehensive income attributable to the owners of the parent
10,670
(378)
10,292
Financial position
Total assets
65,114
2,257
67,371
Net current assets/(liabilities)
28,991
(1,723)
27,268
30.6.2019
Core
CPaaS
Total
£'000
£'000
£'000
Income statement
Revenue
42,522
8,763
51,285
Gross profit
38,145
1,919
40,064
Profit/(loss) before income tax
11,040
(2,167)
8,873
Total comprehensive income attributable to the owners of the parent
10,940
(2,457)
8,483
Financial position
Total assets
52,263
1,698
53,961
Net current assets/(liabilities)
21,177
(736)
20,441
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
4. EMPLOYEES AND DIRECTORS
30.6.20
30.6.19
£'000
£'000
Wages and salaries
16,448
17,029
Social security costs
1,698
1,728
Other pension costs
290
354
18,436
19,111
The average monthly number of employees during the year is as follows
30.6.20
30.6.19
Directors
4
6
Sales and marketing product
164
177
Development and system engineers
103
100
Administration
67
63
338
346
During the year the Group also capitalised staff-related costs of £4,803,204 (2019: £4,924,505) in relation to internally generated development costs.
5. EXCEPTIONAL COSTS
Continuing exceptional costs incurred in the year relate to the ongoing acquisition costs of Comapi of £15,714 (2019: £58,824) and amortisation of acquired intangibles of £120,000 (2019: £120,000).
Discontinued exceptional costs in the year relate to the amortisation of acquired intangibles of £381,072 (2019: £401,709) and impairment of acquired intangibles of £nil (2019: £344,235).
6. NET FINANCE INCOME
30.6.20
30.6.19
£'000
£'000
Finance income:
Deposit account interest
40
19
Finance cost:
Finance lease interest
(98)
-
(58)
19
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
7. OPERATING PROFIT
Costs by nature
Profit from continuing operations has been arrived after charging:-
30.6.20
30.6.19
£'000
£'000
Direct marketing
1,727
2,625
Outsourcing and other costs
4,639
1,752
Total cost of sales
6,366
4,377
30.6.20
30.6.19
£'000
£'000
Staff related costs (inc Directors emoluments)
17,929
17,374
Operating leases: Land and buildings
-
1,162
Operating lease: Other
-
39
Audit remuneration
64
42
Amortisation of intangibles
3,647
2,520
Depreciation charge
1,475
436
Legal, professional and consultancy fees
479
386
Computer expenditure
2,404
2,364
Bad debts
1,248
753
Foreign exchange (gains)/losses
(120)
15
Travel and subsistence costs
509
576
Office running
176
75
Gain on disposal of tangible asset
(3)
-
Staff welfare
399
454
Other costs
531
982
Management charge
(762)
(798)
Total administration costs
27,976
26,380
During the year the Group obtained the following services from the Group's auditor at costs detailed below:
30.6.20
30.6.19
£'000
£'000
Fees payable to the Company's auditor for the audit of Parent Company and consolidated financial statements
22
20
Fees payable to the Company's auditor for other services
- audit of Company subsidiaries
47
47
- Tax and review of interim accounts
3
5
72
72
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
8. INCOME TAX EXPENSE
Analysis of the tax charge from continuing operations:
30.6.20
30.6.19
£'000
£'000
Current tax on profits for the year
758
129
Deferred tax on origination and reversal of timing differences
792
(71)
1,550
58
Analysis of the tax charge from discontinuing operations:
30.6.20
30.6.19
£'000
£'000
Current tax on profits for the year
-
290
Deferred tax on origination and reversal of timing differences
-
-
-
290
Factors affecting the tax charge:
30.6.20
30.6.19
£'000
£'000
Profit on ordinary activities before tax
11,808
8,873
Profit on ordinary activities multiplied by the average rate of corporation tax suffered globally: 19% (2019: 19%)
2,244
1,686
Effects of:
Expenses not deductible
359
151
Research and development enhanced claim
(2,069)
(2,327)
Expenditure permitted on exercising options
(98)
-
Overseas tax losses
(20)
(70)
Depreciation in excess of capital allowances
843
689
Group relief losses brought forward
(501)
-
Current tax on profit for the year
758
129
Deferred tax on origination and reversal of timing differences
792
(71)
Total tax charge for the year
1,550
58
Deferred tax was calculated using the rate 19% (2019: 19%). 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%. In March 2020, the Chancellor announced that the planned reduction in the corporation tax rate to 17% from 1 April 2020 would no longer take place, and the rate would remain at 19% going forwards. Following a Budget resolution on 17 March 2020, the 19% rate was substantively enacted. Accordingly, UK deferred balances have been recognised at 19% in the period.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
9. PROFIT OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is not presented as part of these financial statements. The Parent Company's profit before exceptional items for the financial year was £2,698,172 (2019: loss: £848,539)
10. DIVIDENDS
Amounts recognised as distributions to equity holders in the period
30.6.20
30.6.19
£'000
£'000
Paid dividend for year end 30 June 2020 of 0.67p (2019: 0.64p) per share
1,996
1,903
Proposed dividend for the year end 30 June 2020 of 0.83p (2019: 0.67p) per share
2,480
1,997
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:
30.6.20
30.6.19
From all operations
£'000
£'000
Profit for the year attributable to the owners of the parent
10,258
8,525
Impairment of acquisition-related intangible fixed asset (see note 14)
-
344
Amortisation of acquisition-related intangible fixed asset (see note 14)
501
522
Other exceptional costs
16
59
Share-based payment
682
565
Adjusted profit for the year attributable to the owners of the parent
11,457
10,015
Management does not consider the above adjustments to reflect the underlying business performance. The other exceptional costs relate to ongoing acquisition costs of Comapi.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
11. EARNINGS PER SHARE continued........
30.6.20
30.6.19
£'000
£'000
Adjusted profit for the year attributable to the owners of the parent for continuing activities.
11,454
11,726
Adjusted profit for the year attributable to the owners of the parent for discontinuing activities.
3
(1,711)
Adjusted profit for the year attributable to the owners of the parent
11,457
10,015
30.6.20
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
10,258
298,306,813
3.44
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
11,457
298,306,813
3.84
Options and warrants
-
3,883,050
-
Diluted EPS
Profit for the year attributable to the owners of the parent
10,258
302,189,863
3.39
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
11,457
302,189,863
3.79
30.6.20
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
10,636
298,306,813
3.57
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
11,454
298,306,813
3.84
Options and Warrants
-
3,883,050
-
Diluted EPS
Profit for the year attributable to the owners of the parent
10,636
302,189,863
3.52
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
11,454
302,189,863
3.79
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
11. EARNINGS PER SHARE continued........
30.6.20
Weighted
average
Per share
From discontinued operations
Earnings
number of
Amount
£'000
shares
Pence
Basic EPS
Profit for the year attributable to the owners of the parent
(378)
298,306,813
(0.13)
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
3
298,306,813
(0.00)
Options and warrants
-
3,883,050
-
Diluted EPS
Profit for the year attributable to the owners of the parent
(378)
302,189,863
(0.13)
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
3
302,189,863
(0.00)
30.6.19
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
8,525
298,030,565
2.86
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
10,015
298,030,565
3.36
Options and Warrants
-
4,390,083
-
Diluted EPS
Profit for the year attributable to the owners of the parent
8,525
302,420,648
2.82
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
10,015
302,420,648
3.31
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
11. EARNINGS PER SHARE continued........
30.6.19
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
10,982
298,030,565
3.68
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
11,726
298,030,565
3.93
Options and warrants
-
4,390,083
-
Diluted EPS
Profit for the year attributable to the owners of the parent
10,982
302,420,648
3.63
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
11,726
302,420,648
3.88
30.6.19
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
(2,457)
298,030,565
(0.82)
Adjusted Basic EPS
Adjusted Loss for the year attributable to the owners of the parent
(1,711)
298,030,565
(0.57)
Options and Warrants
-
4,390,083
-
Diluted EPS
Loss for the year attributable to the owners of the parent
(2,457)
302,420,648
(0.81)
Adjusted Diluted EPS
Adjusted loss for the year attributable to the owners of the parent
(1,711)
302,420,648
(0.57)
Weighted average number of shares
30.6.20
30.6.19
Shares
Shares
Basic EPS
298,306,813
298,030,565
Diluted EPS
302,189,863
302,420,648
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
12. CONTINUING AND DISCONTINUED OPERATIONS
The analysis between continuing and discontinued operation is as follows:
Year ended 30 June 2020
Continuing operations
Discontinuing operations
TOTAL
£'000
£'000
£'000
Revenue
47,404
7,508
54,912
Cost of sales
(6,366)
(5,586)
(11,952)
Gross profit
41,038
1,922
42,960
Administrative expense
(27,976)
(1,917)
(29,893)
Share based payments
(682)
-
(682)
Exceptional costs
(136)
(381)
(517)
OPERATING PROFIT
12,244
(376)
11,868
Finance income
40
-
40
Finance costs
(98)
(2)
(100)
PROFIT BEFORE INCOME TAX
12,186
(378)
11,808
Income tax expense
(1,550)
-
(1,550)
PROFIT FOR THE YEAR
10,636
(378)
10,258
Year ended 30 June 2019
Continuing operations
Discontinuing operations
TOTAL
£'000
£'000
£'000
Revenue
42,522
8,763
51,285
Cost of sales
(4,377)
(6,844)
(11,221)
Gross profit
38,145
1,919
40,064
Administrative expense
(26,380)
(3,340)
(29,720)
Share based payments
(565)
-
(565)
Exceptional costs
(179)
(746)
(925)
OPERATING PROFIT
11,021
(2,167)
8,854
Finance income
19
-
19
PROFIT BEFORE INCOME TAX
11,040
(2,167)
8,873
Income tax expense
(58)
(290)
(348)
PROFIT FOR THE YEAR
10,982
(2,457)
8,525
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
13. GOODWILL
Group
30.6.20
30.6.19
COST
£'000
£'000
At 1 July
13,192
13,192
At 30 June
13,192
13,192
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 Group's two cash generating units identified, that being dotdigital and Comapi.
Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently if there are indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated, at acquisition, to cash generating units (CGUs) that are expected to benefit from that business combination.
The carrying amount of goodwill relates to the Group's two trading activities and business segments. This has been tested for impairment during the current period by comparison with the recoverable amounts of the CGU. Recoverable amounts for CGUs are based on the higher of value in use and fair value less costs to sell. The recoverable amounts of the CGU have been determined from value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. 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 6.2% (2019: 6.2%).
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 12% (2019: 19%).
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
13. GOODWILL continued........
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 is 86% (2019: 90%).
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 155% discount rate and growth rate of (17%).
14. INTANGIBLE ASSETS
Group
Customer
relationships
Technology
£'000
£'000
COST
At 1 July 2019
1,205
1,200
Additions
-
-
At 30 June 2020
1,205
1,200
AMORTISATION
At 1 July 2019
824
190
Amortisation for the year
381
120
At 30 June 2020
1,205
310
NET BOOK VALUE
At 30 June 2020
-
890
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
14. INTANGIBLE ASSETS continued........
Computer
Internally generated development
Domain
software
costs
names
Totals
£'000
£'000
£'000
£'000
COST
At 1 July 2019
911
20,794
41
24,151
Additions
43
6,461
1
6,505
At 30 June 2020
954
27,255
42
30,656
AMORTISATION
At 1 July 2019
697
10,706
32
12,449
Amortisation for the year
96
3,549
2
4,148
At 30 June 2020
793
14,255
34
16,597
NET BOOK VALUE
At 30 June 2020
161
13,000
8
14,059
Customer
relationships
Technology
£'000
£'000
COST
At 1 July 2018
1,205
1,200
Additions
-
-
At 30 June 2019
1,205
1,200
AMORTISATION
At 1 July 2018
78
70
Amortisation for the year
402
120
Impairment for the year
344
-
At 30 June 2019
824
190
NET BOOK VALUE
At 30 June 2019
381
1,010
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
14. INTANGIBLE ASSETS continued........
Computer
Internally generated development
Domain
software
costs
names
Totals
£'000
£'000
£'000
£'000
COST
At 1 July 2018
806
15,286
37
18,534
Additions
105
5,508
4
5,617
At 30 June 2019
911
20,794
41
24,151
AMORTISATION
At 1 July 2018
611
7,957
31
8,747
Amortisation for the year
86
2,749
1
3,358
Impairment for the year
-
-
-
344
At 30 June 2019
697
10,706
32
12,449
NET BOOK VALUE
At 30 June 2019
214
10,088
9
11,702
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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
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 2019
-
646
779
2,294
3,719
Additions
63
78
22
177
340
Disposals
-
-
(30)
-
(30)
Adjustment on transition of IFRS 16
5,335
-
-
-
5,335
Exchange differences
60
6
(1)
2
67
At 30 June 2020
5,458
730
770
2,473
9,431
DEPRECIATION
At 1 July 2019
-
402
554
1,726
2,682
Depreciation for the year
1,122
63
77
286
1,548
Disposals
(61)
-
-
-
(61)
Exchange differences
(3)
-
1
2
-
At 30 June 2020
1,058
465
632
2,014
4,169
NET BOOK VALUE
At 30 June 2020
4,400
265
138
459
5,262
Short
Fixtures &
Computer
leasehold
fittings
equipment
Totals
£'000
£'000
£'000
£'000
COST
At 1 July 2018
612
643
2,000
3,255
Additions
32
133
291
456
Exchange differences
2
3
3
8
At 30 June 2019
646
779
2,294
3,719
DEPRECIATION
At 1 July 2018
340
481
1,388
2,209
Depreciation for the year
61
71
333
465
Exchange differences
1
2
5
8
At 30 June 2019
402
554
1,726
2,682
NET BOOK VALUE
At 30 June 2019
244
225
568
1,037
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
15. PROPERTY, PLANT AND EQUIPMENT continued........
Included in the net carrying amount of property, plant and equipment as at 30 June 2020 are the right-of-use assets as follows:
Motor
Properties
vehicles
Totals
£'000
£'000
£'000
COST
Transition on adoption of IFRS 16
5,678
82
5,760
Re-measurement of existing lease liabilities
(156)
-
(156)
Termination of leases
(269)
-
(269)
Additions
63
-
63
Foreign currency translation
60
-
60
At 1 July 2019
5,376
82
5,458
DEPRECIATION
Depreciation for the year
1,079
43
1,122
Termination of leases
(61)
-
(61)
Foreign currency translation
(3)
-
(3)
At 30 June 2020
1,015
43
1,058
NET BOOK VALUE
At 30 June 2020
4,361
39
4,400
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
16. INVESTMENTS
Company
Shares in
Shares in
Group
Group
undertakings
undertakings
30.6.20
30.6.19
COST
£'000
£'000
At 1 July
Disposals
18,666
(5)
18,666
-
At 30 June
18,661
18,666
IMPAIRMENT
At 1 July and 30 June
3,519
3,519
NET BOOK VALUE
At 30 June
15,142
15,147
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 %
dotdigital EMEA Limited
Web and email-based
Ordinary
100
marketing
Ordinary A
100
dotdigital Inc
Web and email-based
Ordinary
100
marketing
dotdigital APAC Pty Limited
Web and email-based marketing
Ordinary
100
Dotdigital B.V
Web and email-based marketing
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
Development hub
Ordinary
100
Dynmark International Ltd
Omni-channel communication platform
Ordinary
100
Dynmark S.p z.o.o
Omni-channel communication platform
Ordinary
100
All of the above subsidiaries have been included within the consolidated results. dotdigital EMEA Limited and Dynmark International Limited 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 and Dynmark S.p. z.o.o. was incorporated in Poland.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
17. TRADE AND OTHER RECEIVABLES
Group
Company
30.6.20
30.6.19
30.6.20
30.6.19
£'000
£'000
£'000
£'000
Current:
Trade receivables
10,364
9,155
-
-
Less: Provision for impairment of trade receivables
(1,589)
(999)
-
-
Trade receivables - net
8,775
8,156
-
-
Other receivables
194
218
3
-
Amounts owed by Group undertakings
-
-
694
692
VAT
-
-
11
14
Tax receivable
-
392
-
-
Prepayments and contract assets
4,018
3,456
89
102
12,987
12,222
797
808
Further details on the above can be found in note 23.
Included within prepayments is an amount of £404,150 (2019: £662,912) 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
30.6.20
30.6.19
30.6.20
30.6.19
£'000
£'000
£'000
£'000
Bank accounts
25,383
19,320
396
594
25,383
19,320
396
594
Further details on the above can be found in note 23.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
19. CALLED UP SHARE CAPITAL
Allotted, issued, fully paid
Nominal
30.6.20
30.6.19
Number
value
£'000
£'000
298,547,645 (2019: 298,030,565)
£0.005
1,493
1,490
1,493
1,490
During the reporting period the Company undertook the following transactions involving the issuing of share capital:
On 18 December 2019 an employee exercised their share options, increasing the issued share capital by 250,000 shares at a premium price of 28p.
On 18 December 2019 an employee exercised their share options, increasing the issued share capital by 267,080 shares at a premium price of 39.75p.
20. RESERVES
Group
Retained
Share
Reverse acquisition
earnings
premium
reserve
£'000
£'000
£'000
As at 1 July 2019
37,161
6,791
(4,695)
Issue of share capital
-
176
-
Dividends
(1,996)
-
-
Profit for the year
10,258
-
-
Transfer of reserves
30
-
-
IFRS 16 restatement
61
-
-
Other comprehensive income: currency translation
-
-
-
Share-based payment
-
-
-
Balance as at 30 June 2020
45,514
6,967
(4,695)
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
20.
RESERVES - continued
Retranslation
Other
Reserve
reserves
Totals
£'000
£'000
£'000
As at 1 July 2019
16
720
39,993
Issue of share capital
-
-
176
Dividends
-
-
(1,996)
Profit for the year
-
-
10,258
Transfer of reserves
-
(30)
-
IFRS 16 restatement
-
-
61
Other comprehensive income: currency translation
34
-
34
Share-based payment
-
682
682
Balance as at 30 June 2020
50
1,372
49,208
Group
Retained
Share
Reverse acquisition
earnings
premium
reserve
£'000
£'000
£'000
As at 1 July 2018
32,331
6,791
(4,695)
Issue of share capital
-
-
-
Dividends
(1,903)
-
-
Profit for the year
8,525
-
-
Transfer in reserves
506
-
-
IFRS 15 reclassification
(2,837)
-
-
IFRS 15 Deferred tax adjustment
539
-
-
Currency translation
-
-
-
Share-based payment
-
-
-
Balance as at 30 June 2019
37,161
6,791
(4,695)
Retranslation
Other
reserve
reserves
Totals
£'000
£'000
£'000
As at 1 July 2018
(26)
661
35,062
Issue of share capital
-
-
-
Dividends
-
-
(1,903)
Profit for the year
-
-
8,525
Transfer in reserves
-
(506)
-
IFRS 15 reclassification
-
-
(2,837)
IFRS 15 Deferred tax adjustment
-
-
539
Currency translation
42
-
42
Share-based payment
-
565
565
Balance as at 30 June 2019
16
720
39,993
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
20.
RESERVES - continued
Company
Retained
Share
Other
earnings
premium
Reserves
Totals
£'000
£'000
£'000
£'000
At 1 July 2019
3,515
6,791
720
11,026
Issue of share capital
-
176
-
176
Dividends
(1,996)
-
-
(1,996)
Profit for the year
2,001
-
-
2,001
Transfer in reserves
30
-
(30)
-
Share-based payment
-
-
682
682
At 30 June 2020
3,550
6,967
1,372
11,889
Company
Retained
Share
Other
earnings
premium
Reserves
Totals
£'000
£'000
£'000
£'000
At 1 July 2018
5,761
6,791
661
13,213
Issue of share capital
-
-
-
-
Dividends
(1,903)
-
-
(1,903)
Loss for the year
(849)
-
-
(849)
Transfer in reserves
506
-
(506)
-
Share-based payment
-
-
565
565
At 30 June 2019
3,515
6,791
720
11,026
21. TRADE AND OTHER PAYABLES
Group
Company
30.6.20
30.6.19
30.6.20
30.6.19
£'000
£'000
£'000
£'000
Current:
Trade payables
1,732
3,975
10
59
Amounts owed to Group undertakings
-
-
2,899
3,932
Social security and other taxes
50
81
-
-
Other payables
179
150
-
-
VAT
1,801
1,162
-
-
Accruals and contract liabilities
6,034
5,728
47
42
9,796
11,096
2,956
4,033
Further details on liquidity and interest rate risk can be found in note 23. Amounts due to subsidiaries are non-interest bearing and are repayable on demand.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
22. LEASE LIABILITIES
Group
Properties
Motor Vehicles
Totals
£'000
£'000
£'000
At 1 July 2019
-
-
-
Transition on adoption of IFRS 16
5,678
82
5,760
Re-measurement of existing lease liabilities
(162)
-
(162)
Termination of leases
(264)
-
(264)
Additions
63
-
63
Principal repayments
(1,084)
(44)
(1,128)
Interest
136
2
138
Foreign currency retranslation
60
-
60
At 30 June 2020
4,427
40
4,467
Current
1,034
34
1,068
Non-current
3,393
6
3,399
At 30 June 2020
4,427
40
4,467
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
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - continued
Financial instruments by category
The following table sets out the financial instruments as at the reporting date:
Group
Company
30.6.20
30.6.19
30.6.20
30.6.19
£'000
£'000
£'000
£'000
Financial assets
Trade and other receivables
8,969
8,766
708
706
Bank balances
25,383
19,320
396
594
34,352
28,086
1,104
1,300
Financial liabilities
Trade payables
1,732
3,975
10
59
Amounts owed to group undertakings
-
-
2,899
3,932
Other payables
2,030
1,393
-
-
3,762
5,368
2,909
3,991
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 £3,712,000 (2019: £5,287,000) are expected to mature in less than a year.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - continued
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 2020 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:
30.6.20
30.6.19
£'000
£'000
0-30 days
6,770
6,408
30-60 days
911
521
More than 60 days
2,683
2,226
10,364
9,155
The maturity of the Group's provision for impairment is as follows:
30.6.20
30.6.19
£'000
£'000
0-30 days
1
27
30-60 days
13
-
More than 60 days
1,575
972
1,589
999
The movement in the provision for the impairment is as follows:
30.06.20
30.6.19
£'000
£'000
As at 1 July
999
403
Provision for impairment
1,048
621
Receivable written off in the year
(335)
(5)
Unused amount reversed
(123)
(20)
As at 30 June
1,589
999
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 £2,960,513 (2019: £2,053,528) of which £1,574,891 (2019: £972,221) 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
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - continued
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 (2019: £nil) and amounts payable over one year are nil (2019: £nil). The Group had a strong cash reserve to utilise for any short-term capital requirements that were needed by the Group.
The Group has continued to look for a further long-term investments or acquisitions and therefore, to maintain or re-align the capital structure, the Group may adjust when dividends are paid to shareholders, return capital to shareholders, issue new shares or borrow from lenders.
24. DEFERRED TAX
30.6.20
30.6.19
£'000
£'000
As at 1 July
1,377
1,697
IFRS 15 adjustment
-
(539)
Current year provision
792
219
2,169
1,377
The deferred tax liability above comprises the following temporary differences:
30.6.20
30.6.19
£'000
£'000
Acquired intangibles
169
264
Capital allowances in excess of depreciation
53
65
R&D relief in excess of amortisation
2,473
1,919
Share option relief
(457)
(332)
IFRS 15 prior year deferred tax
-
(539)
Losses
(69)
-
2,169
1,377
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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
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
30.6.20
30.6.19
£'000
£'000
Sale of services
Cadence Performance
Entity under common directorship
Email marketing services
-
2
Cloudcall Group Plc
Entity under common directorship
Email marketing services
-
12
Epwin Group Plc
Entity under common directorship
Email marketing services
4
-
4
14
Year end balances arising from sale of services
Cloudcall Group Plc
Entity under common directorship
Email marketing services
-
1
Epwin Group Plc
Entity under common directorship
Email marketing services
1
-
1
1
Directors
30.6.20
30.6.19
£'000
£'000
Aggregate emoluments
774
835
Company contributions to money purchase pension scheme
25
21
Share-based payments from the LTIP options granted
438
389
1,237
1,245
Directors' pay summary does not include Non-Executive Directors.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
26. RELATED PARTY DISCLOSURES continued…..
Information in relation to the highest paid Director is as follows:
30.6.20
30.6.19
£'000
£'000
Salaries
440
435
Other benefits
17
12
Pension costs
16
13
Share-based payments on the LTIP options granted
289
289
762
749
Company
The following transactions were carried out with related parties
30.06.20
30.06.19
£'000
£'000
Year end balances arising from sales/purchase of services
Dotdigital EMEA Limited
Subsidiary
Payables
651
651
651
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
30.6.20
30.6.19
£'000
£'000
dotdigital EMEA Limited
Subsidiary
As at 1 July
(4,580)
(2,559)
Loans advanced
3,060
51
Loans repaid
(2,025)
(2,072)
(3,545)
(4,580)
IAS 24 allows disclosure exemption of transactions between wholly-owned subsidiaries that are eliminated on consolidation.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
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 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 £682,000 (2019: £565,000).
Vesting conditions of the options dictate that employees must remain in the employment of the Group for the whole period to qualify.
Movement in issued share options during the year
The table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during the period. The options outstanding at 30 June 2020 had a WAEP of 51.09p (2019: 49.16p) and a weighted average contracted life of 3.01 years (2019: 3.66 years) and their exercise prices ranged from 0.5p to 68.50p. All share options are settled in form of equity issued.
30.06.20
30.6.19
No of options
WAEP
No of options
WAEP
Outstanding at the beginning of the period
4,428,064
49.16p
3,732,262
9.43p
Granted during the year
-
0p
2,305,000
50p
Forfeited/cancelled during the period
-
0p
(1,609,198)
50p
Exchanged for shares
(517,080)
34.57p
-
0p
Outstanding at the end of the period
3,910,984
51.09p
4,428,064
49.16p
Exercisable at the end of the period
230,985
68.50p
748,065
45.05p
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
28. SHARE-BASED PAYMENT TRANSACTIONS - continued
The weighted average share price at the date of the exercise for share options exercised during the period was 92p (2019: £nil).
24
October
2018
19
December
2017
20 June 2017
Number of options granted
2,305,000
1,375,000
230,985
Share price at grant date
77.5p
85.95p
68.50p
Exercise price
0.50p
0.50p
68.50p
Option life in years
5 years
5 years
5 years
Risk-free rate
1.23%
1.33%
1.33
Expected volatility
30%
30%
30%
Expected dividend yield
1%
1%
1%
Fair value of
52.70p
65.03p
12.04p
options
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 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.
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 30 JUNE 2020
29.
GROUP RECONCILIATION OF PROFIT BEFORE CORPORATION TAX TO CASH GENERATED FROM OPERATIONS
Group
Company
30.6.20
30.6.19
30.6.20
30.6.19
£'000
£'000
£'000
£'000
Current:
Profit before tax from all operations
11,808
8,873
2,001
(849)
Currency revaluation
-
42
-
-
Amortisation
4,148
3,358
-
-
Depreciation
1,548
465
-
-
Exceptional costs
16
344
-
-
Finance lease non-cash movement
4
12
-
-
IFRS 15 reclassification
-
(2,837)
-
-
IFRS 16 restatement
61
-
-
-
Gain on disposal of fixed assets
(3)
-
-
-
Loss on disposal of investments
-
-
5
-
Share-based payments
682
565
682
565
Finance income
-
(19)
-
-
Finance expense
100
-
-
-
18,364
10,803
2,688
(284)
(Increase)/decrease in trade receivables
(1,157)
811
11
74
Increase/(decrease) in trade payables
(1,300)
879
(1,077)
2,061
Cash generated from operations
15,907
12,493
1,622
1,851
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 2018
15,005
646
As at 30 June 2019
19,320
594
As at 30 June 2020
25,383
396
31. PROJECT DEVELOPMENT
During the year the Group incurred £6,461,313 (2019: £5,507,539) 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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