www.dotdigitalgroup.com
2010/2011
AnnUAL RePoRt AnD ACCoUnts
oUR VALUes
Professional,
expert and fun
Creative and
geeky with the
human touch
Approachable,
sociable,
welcoming and
client-centric
Fast-paced but
quality driven
Corporate
but cool
Business-like,
entrepreneurial
but still a family
oUR MIssIon
empowering clients to punch above their weight by providing
the world’s best digital marketing products.
CoMPAnY InFoRMAtIon
Directors
s Bird
n C P nelson
P A simmonds
I taylor
G Fidura
R Kellett-Clarke (appointed 13 June 2011)
F Beechinor-Collins (appointed 5 May 2011)
D Pacy (resigned 13 December 2010)
secretary
M Patel
registereD office
Finsgate
5-7 Cranwood street
London
eC1V 9ee
registereD number
06289659 (england and Wales)
auDitors
Jeffreys Henry LLP
Finsgate
5-7 Cranwood street
London
eC1V 9ee
solicitors
BPe solicitors LLP
st James House
st James square
Cheltenham
GL50 3PR
PrinciPal bankers
national Westminster Bank plc
Charing Cross, London Branch
Po Box 113
Cavell House
2a Charing Cross Road
London
WC2H 0PD
registrars
share Registrars Limited
suite e First Floor
9 Lion and Lamb Yard
Farnham
surrey
GU9 7LL
nomaD/broker
Zeus Capital
3 Ralli Courts
West Riverside
Manchester
M3 5Ft
Joint broker
Charles stanley
131 Finsbury Pavement
London
eC2A 1nt
Website
www.dotdigitalgroup.com
Contents
01
02
03
13
16
18
21
22
24
29
30
30
31
32
33
34
35
35
36
business summary
key HigHligHts anD financial overvieW
cHairman’s anD cHief eXecutive’s rePort
corPorate social resPonsibility rePort
our boarD of Directors
corPorate governance rePort
auDit committee rePort
remuneration committee rePort
rePort of tHe Directors’
inDePenDent auDitor’s rePort
consoliDateD income statement
consoliDateD statement of comPreHensive income
consoliDateD statement of financial Position
comPany statement of financial Position
consoliDateD statement of cHanges in equity
comPany statement of cHanges in equity
consoliDateD statement of casH floWs
comPany statement of casH floWs
notes to tHe consoliDateD financial statements
ibc comPany information
croydon
no. 1 croydon
12-16 addiscombe road
cr0 0Xt
t: 020 8662 2762
edinburgh
mWb business exchange
9-10 st andrews square
edinburgh
eH2 2af
t: 0131 718 6037
london bridge
6-8 emerson street
london
se1 9Du
t: 020 7654 8686
northampton
unit 10-11 Hall farm
sywell aerodrome
sywell
northampton
nn6 0bn
t: 01604 781 044
manchester
Pall mall court
61-67 king street
manchester
m2 4PD
t: 0161 618 1070
Design and production by Philosophy
www.philosophydesign.com
Print by Moore Print
www.mooreprint.co.uk
OUR VALUES
Passionate
about our
client/supplier
partnerships
and cakes!
Awesome
is the required
standard
An unhidden
agenda about
clients success
Motivated,
inspirational,
innovative and
accomplished
Committed
to giving back
to staff and
society
Easy to use
space-age
technologies
BUSINESS SUMMARY
dotDigital is an award-winning digital marketing specialist
with over 4,000 clients generating strong recurring revenues
from the provision of an integrated suite of digital marketing
products and value added services:
dotDigital
Group Plc
Mobile
SMS
Templates
Search
Lead
vision
Content
management
Platform
Email
marketing
Landing
pages
Social
Surveys
Training
dotDigital
Services
Enterprise
e-commerce
Support
Web design
Managed
services
1
dotDigital Group Plc Annual Report and Accounts 2010/2011 KEY hIGhLIGhTS
49%
increase in
turnover
Turnover up 49%
•
• Operating profits up 68% before AIM admission costs
• Profits after tax up 166% after exceptional items
• Cash £2.6m up from £1.3m
• Considerable investment in hardware and product R&D
• Continued strong growth in new client acquisition
• 1,470 new customers added in the period
• Considerable product enhancement delivered
•
Total staff headcount grown from 103 to 142
43%
increase in
expenses
68%
increase in operating
profit before
exceptionals
140%
increase in profit
before tax
166%
increase in profit
after tax
2
www.dotdigitalgroup.com Annual Report and Accounts 2010/2011 ChAIRMAN’S & ChIEF ExECUTIVE’S REPORT
FINANCIAL OVERVIEW
Turnover
Expenses
Operating Profit (before exceptional items)
AIM Admission
Finance Income
Profit before tax
Profit after tax
12m to
30.06.11
12m to
30.06.10
Period
1.05.08 to
30.06.09
2011
% Growth
9.0
6.6
2.3
(0.1)
1.1
3.3
3.0
6.0
4.6
1.4
-
-
1.4
1.1
4.7
3.7
1.0
-
-
1.0
0.9
49%
43%
68%
-
-
140%
166%
The Group has enjoyed another strong year of profitable growth,
slightly ahead of analyst’s expectations.
On turnover up 49% to £9.0m operating profits before exceptional
items (AIM admission costs) grew 68%.
In accordance with IFRS 3 we have reviewed the likely final payment
in October 2012 to the vendors of Netcallidus based on the Board’s
estimated financial outturn of the business for the year ended 30th
June 2012.
This has resulted in a reduction of the estimated total consideration
by £1.1m and in accordance with the IFRS 3 this is shown as finance
income in the consolidated income statement. The inclusion of this
£1.1m means profit before tax has grown 140%.
Overall the Board is delighted with the progress made over the year
which reflects a continued focus on organic growth through new
client acquisition and investment in new products and services.
Whilst the Group has been focused on achieving significant growth
in recurring revenues and profitability, investment has continued in
people and product development for the future. To ensure the
on-going development of existing products and strengthening
of the competitive position with new products and services, the
Company has continued to commit significant resources to the
underlying technical infrastructure which supports its products.
The total investment this year has amounted to £150k of capital
expenditure in hardware and £630k of research and development
activity in products and services.
INTEGRATION OF NETCALLIDUS ACQUISITION
Integration of Acquisition
The Group acquired Netcallidus, an SEO (Search Engine Optimisation)
business in 2010. The business is based in Northampton with a wholly
owned operation in Minsk.
Excellent progress has been made on the integration of Netcallidus.
All accounting and management information is now handled by our
central finance team and sales teams across all of the Group businesses
have been trained in the sale of SEO with cross sales from existing
customers, forming a valuable source of new business. Towards the
end of the financial period the Board agreed to rebrand all of the
search marketing activity as dotSearch.
In the year, search marketing contributed over £1.2m of revenue
compared to £0.1m in the previous year and is now a significant focus
for the sales team.
Minsk, Belarus
In October 2010 the Company announced the opening of a new
facility in Minsk initially employing fifteen staff to provide strengthened
operational capability for search marketing and at the same time
removing the requirement for outsourced services from India.
During the year, this team grew significantly and by the end of the
financial year the headcount in Minsk stood at 45. The majority of staff
are involved in search marketing, although a number are engaged in
a pilot operation to provide technical support for the whole Group.
GROWTH STRATEGY
dotDigital won the National Business Awards best growth strategy
award in 2009. This was in recognition of the Company’s organic growth
strategy in pursuing new client acquisition. This was achieved by a
culmination of online marketing, attendance at trade shows and through
an increased level of cross-sell to existing clients through focused account
management and provision of complimentary and adjacent services.
By focusing on search engine optimisation on the Company’s
own behalf across a wide range of keywords and through the
implementation of a comprehensive CRM system, dotDigital has
continued to see high levels of organic growth with new client
numbers increasing by 1,470 in the year.
During this time the Company has continued its strategy of building
the business by focusing on four key areas:
• Targeted marketing activity delivering high quality leads to
a fully motivated and goal aligned sales team;
• Recruitment of the best available talent in all business areas;
• Designing and building innovative products which are intuitive
to use and deliver high levels of functionality to assist our clients
in beating their business objectives;
• Delivering outstanding levels of support and client care.
Through the provision of an integrated suite of digital marketing
products backed up by excellent services, the Company believes that
its business is uniquely positioned to enable clients to exceed their
marketing capacity, grow their business and achieve a visible return
on investment.
STAFF
As a technology business we acknowledge that our people are critical
to our success. We have a young team, whose average age is 29
(excluding Directors). The team has taken on extra responsibilities,
learned new skills and responded to new challenges in the year.
3
dotDigital Group Plc Annual Report and Accounts 2010/2011
ChAIRMAN’S & ChIEF ExECUTIVE’S REPORT CONTINUED
The quality and commitment of our team is
one of the factors which gives the Board great
confidence that we can continue to grow even
in difficult economic times.
AGE OF EmpLOYEES (bY NUmbER OF EmpLOYEES)
40
35
30
25
20
15
10
5
0
20-25
26-30
31-40
41-50
The quality and commitment of our team is one of the factors which
gives the Board great confidence that we can continue to grow even
in difficult economic times. We believe in giving employees sufficient
autonomy to make good decisions about everything from product
design to dealing with customer service issues. It is because of the
quality of our staff that we have continued to grow our customer base
and deliver great new products and services to our clients.
Once again the Board would like to thank all of the management and
staff for their continued hard work, dedication and commitment to the
business during the past year.
With this in mind we aim to share the success of the Group with the
staff through bonus payments and share options. The Directors are
open about the business objectives and senior managers actively
engage with their teams so that everyone understands how their
efforts contribute to the overall success of the business.
4
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
Staff who have completed their probation period are eligible to
be granted share options managed through an hMRC approved
employee share option scheme.
Despite becoming a much larger enterprise, the Directors firmly
believe that maintaining the entrepreneurial culture that was so
fundamental to the success of the Company in its initial stages,
remains critical in achieving success today. The communication of
these ideas is essential to dotDigital and it uses a number of channels
and tools to ensure that a common vision exists across the Group.
This in turn promotes a sense of belonging to the business.
During the year we have undertaken two surveys of all staff to
ascertain the levels of job satisfaction. The Board has also engaged
an interim hR Director to progress a variety of initiatives focussed
on talent development, communication and ensuring dotDigital
is a great place to work.
DOTDIGITAL IS A GOOD pLACE TO WORk
80
60
50
40
30
20
10
0
December 2010
August 2011
Strongly disagree Disagree Agree Strongly agree Not applicable
Our business is split into
five main brands and
business units, each with
high level expertise:
dotMailer – powerful email marketing made
easy , by the second largest and fastest growing
email agency and ESP in the UK and the number
1 choice of over 18,000 business users. Uniquely
designed to meet the needs of every size and
type of organisation in the market.
dotCommerce – our ecommerce experts
deliver stunning, flexible and cutting-edge
ecommerce sites. Powered by our proprietary
back-office system that puts users in complete
control, dotCommerce solutions help to
transform the way our clients sell online.
dotEditor – the uniquely flexible content
management system that powers most of our
clients’ websites and lets them manage their
own website content, SEO, menus, banners
and URLs. It’s so flexible it even lets them paste
features and functions straight into their pages.
dotSearch – Our search marketing agency,
specialists in taking a highly analytical
and bespoke approach to SEO and PPC,
to repeatedly win our clients top Google
rankings, search category domination and
major market share.
dotSurvey – perfectly branded online surveys,
created in minutes with our latest online
survey tool. Built for total usability, dotSurvey
makes it fantastically easy for users to create
fully branded, professional online surveys and
web forms that look just like they’re part of
their website.
Annual Report and Accounts 2010/2011 5
dotDigital Group Plc
ChAIRMAN’S & ChIEF ExECUTIVE’S REPORT CONTINUED
WOW WOW WOW!
Love it.
Hayley
Lema publishing
dotMailer provides Brit Insurance with
a professional, reliable and high quality
platform for our email marketing. I have been
consistently impressed with every aspect of
our relationship with them from the product
itself through to the phone support and
account management. I love the fact that the
product is always evolving and that finding
smart new ways of helping clients deliver
great emails is at the heart of what they do.
I regard them as a very safe pair of hands.
Katherine Hesketh
Brit Insurance, London
6
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
49%
Increase in
revenue in 2011
dotCommerce identified this as a
significant area where Pineapple
could improve on the web
experience for customers. After
looking at relevant data from
Google Analytics we agreed on a
solution, which was delivered on
time, with immediate results.
Caleb Newman
Pineapple
Annual Report and Accounts 2010/2011 7
dotDigital Group Plc
OUR COmmITmENT TO ExCEpTIONAL CLIENT SERVICE
The Board firmly believes that the key to a long-term, sustainable
business emanates from delighting our customers. Everyone in the
business is customer driven and the Company is striving to develop
a culture that is passionate about customer relations.
The business is structured to ensure that all customers receive client
service and support appropriate to their needs and the revenue they
generate. During the year, a number of new initiatives were introduced
to ensure our products and services meet and exceed customer needs,
including:
• Expanding the friendly and effective telephone support teams as
well as employing new technologies such as Live Chat to enhance
the overall customer experience;
• Boosting our team of user-experience specialists to enhance even
further the usability of our products;
•
In-depth client interviews to understand how our service can be
improved further with ongoing surveys to get quantitative data on
client needs;
• The use of user groups, forums and social media to obtain first-hand
feedback from customers about new product features.
IT INFRASTRUCTURE
The Group has made significant investment in its IT infrastructure
during the period. As part of the strategy to ensure the business is
well positioned to exploit future growth opportunities, the Board has
approved capital expenditure on a number of projects including:
• Ensuring future scalability through the use of latest blade server
technology and SAN data storage systems;
• Creating a full-scale test facility;
• Reducing dependencies on single suppliers;
• Reducing environmental impact by selecting low power
consumption hardware;
• Fully documenting systems and security policies;
•
Increasing resilience by eliminating single points of failure and
implementing mirroring technology;
• Ongoing extensive security audits, including external penetration
testing and responding to recommendations.
ChAIRMAN’S & ChIEF ExECUTIVE’S REPORT CONTINUED
dotMailer has been a great service for
2degrees both to gain new members of
our community and to communicate with
them. The reporting on the success of each
campaign is excellent, the managing of
our address books is simple and now the
introduction of the Easy Editor has meant we
are finding it easy to produce better looking
campaigns all the time.
Simon Barnard
2degrees Ltd, Oxford
8
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
ImpROVING GROSS mARGIN ON bESpOkE pROjECTS
Following successful trials last year, the Group modified its approach
to managing bespoke projects carried out on behalf of clients. Whilst
project management, project specification and account management
are still carried out by employees based in the UK, much of the
development activity will be carried out by our Belarusian team and
partner organisations operating with a lower cost and fixed prices
to ensure margins are managed.
The Directors are pleased to report that this approach has increased
profitability, gives greater flexibility of scheduling, and ensures a
greater capacity to scale to meet client demands.
pRODUCT DEVELOpmENT
The Board has a clear strategy to increase the proportion of income
derived from products with recurring revenues. The development
team working on product development has been significantly
strengthened during the year. Throughout the year, a significant
number of new features and usability improvements for the email
marketing product, dotMailer, including the release of an innovative,
market leading visual editor, were introduced. Other product
developments, included new versions of our content management
tool, and a new survey tool.
STRATEGY FOR THE COmING YEAR
We are entering the second year of our three year business plan that
the Board believes will continue to deliver growth whilst investing in the
business to provide a springboard for significant growth in future years.
We plan to streamline the organisation structure and operationally
the business will be separated into a products division based around
the dotMailer platform and a services division providing, search,
ecommerce, web design, digital strategy and managed service.
Some key elements of the plan are as follows:
• dotDigital recognises that dynamic growth in this market is
occurring worldwide. Part of the Group’s short term objective is to
identify the geographic areas in which the Company could make
the maximum impact without adding significantly to the cost base;
• Progress the programme of international expansion of the
product ranges utilising third party channel partners and reseller
agreements with suitably qualified overseas partners, allowing us
to grow our sales cost effectively;
• Explore consolidation opportunities in the email marketing sector;
dotMailer has been providing Saffery
Champness with effective solutions and
support to our e-marketing campaigns since
2009. The system is constantly being
developed and improved, coupled with
the dedicated support agents and account
management team, dotMailer constantly
delivers a quality service in a timely and cost
efficient way.
Nicola Brooks
Saffery Champness, London
Annual Report and Accounts 2010/2011 9
dotDigital Group Plc
ChAIRMAN’S & ChIEF ExECUTIVE’S REPORT CONTINUED
‘ ...we believe we are in a strong position as
the trend in shifting away from traditional
promotion to digital marketing continues..’
• Further increase the resources focused on dotDigital’s own search
engine optimisation and business marketing, expanding the use of
social media marketing, PR, educational client events and reviewing
our branding. To further expand the technical development
resources both in the UK and internationally to focus on the delivery
of innovative new products and services which compliment our
existing off erings. We will continue to add innovative new features
to our existing products, ensuring we maintain technical leadership
in the market;
• Expand the strategy of building Application Programming Interface
(API), driven connectors to CRM platforms, such as Microsoft
Dynamics, and utilising CRM integrators as a distribution channel
for our email marketing platform.
DIVIDEND pOLICY
Whilst consideration is routinely given to the commencement of
dividend payments, it is the Board’s intention to achieve capital
growth on the strength of continued investment in new products and
identifying further earning enhancing acquisitions. Accordingly, it is
not the Board’s intention to recommend the payment of dividends at
this time.
OUTLOOk
The market for the Company’s products and services continues
to remain buoyant despite the world economic crisis. Moreover,
the growth in the number of customers remains unabated as they
continue to embrace the power of digital marketing.
With a growing customer base we plan to focus on cross-selling our
suite of products and services to existing customers. Evidence thus far
demonstrates that this is a very cost eff ective way to grow sales and
we expect this trend to continue.
Our cash position remains strong, even after the acquisition of
Netcallidus and we expect the business to continue to be cash
generative. Because of this we believe we are well placed to continue
to invest in hardware, research and development and further
acquisitions.
Brand recognition of the Group’s products continues to grow and
through this strong awareness, combined with customer testimonials,
increased marketing activity and continuously improving products will
position the business well in securing new clients in the future.
We look forward to the new fi nancial year with confi dence.
Frank beechinor-Collins
Chairman
12th October 2011
peter Simmonds
Chief Executive
12th October 2011
10
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
122 Average
new client
wins per
month
Annual Report and Accounts 2010/2011 11
dotDigital Group Plc
Google Pay Per Click and email marketing
using the dotMailer system are two crucial
strategies used by internet marketing
specialists Brand New Way to help companies
to attract and keep valuable customers. The
dotMailer system is both simple to use and
provides many advanced features to help get
great results for companies big and small.
My only regret is the system wasn’t available
10 years earlier!
Peter Hawtin
Brand New Way Limited
When asked by other UK based broadcast platforms
why I use dotMailer for my clients, I say the same
thing.” If you can guarantee me the same level of
support, always seek ways to keep my costs down and
continually strive to improve the system, then yes I’ll
consider using you”. End of conversation.
Ross Piggott
RP Databases Ltd, Wandsworth
After an extensive search for a new email provider Ashburton
Investment Managers chose dotMailer in May 2011. We are
extremely happy with this decision, not only have we benefited
from their expertise in the field of email marketing, in terms
of design templates and reporting tools, but we’ve also found
the online system is very easy to use with the excellent support
of our account manager, Matt. We also wanted to improve
our event RSVP process, after providing a brief, not only
did DotMailer deliver an online booking form as requested,
but they also developed trigger emails to add to recipients
calendars, all automated therefore relieving the burden of an
in-house manual RSVP process. We look forward to working
closely dotMailer to help us continue to improve our marketing
communication to our clients.
Lizzie Fancourt
Ashburton Investment Managers, Jersey
12
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
CORPORATE SOCIAL RESPONSIBILITY REPORT
The Board is committed to creating a working
environment where there is mutual trust and
where everyone is accountable for their own
actions and takes full responsibility for the
performance and reputation of the business.
The Board believes in the importance of social responsibility and
sustainability within the business. A responsible approach to the
environment, health and safety and fair treatment of our people,
our customers, our suppliers, our local communities and other key
stakeholders is embedded in our Group culture and values. In a
nutshell, dotDigital recognises its obligations to all those with whom
it has dealings and our good reputation is vital to instill confidence in
all who do business with us.
SUppORT FOR THE NOT FOR pROFIT SECTOR
The UK charity sector has always been a key focus for the business.
dotDigital has a pre-determined pricing model for registered charities
and has worked with some of the country’s leading charities including
Fairtrade, Wateraid, Stonewall, MacMillan Cancer Support and Shelter.
dotDigital is committed to providing the very highest possible services
and quality products to charities at an affordable rate.
“Giving Something Back”
dotDigital are determined to support our local communities and
have introduced a Business Volunteering Scheme for employees who
are doing a variety of community-based projects. As well as this new
scheme, dotDigital continue to donate funds to MacMillan Cancer
Support through our “Big Pink” initiative.
SUSTAINAbILITY AND THE ENVIRONmENT
dotDigital has been quick to accentuate the environmentally friendly role
of digital marketing in its thought leadership and media outreach and has
worked with both the Direct Marketing Association (DMA) and Internet
Advertising Bureau (IAB) to promote this message. Email marketing is a
viable paper-free alternative to direct mail and leafleting.
dotDigital continues to make a significant investment in the
virtualisation, storage technology and modern blade hardware to
continue to deliver high levels of customer service to dotDigital Group
customers whilst dramatically reducing the environmental impact of
running a large data-centre. The key benefits include:
Increased resilience of our key infrastructure;
•
• Server consolidation from many independent computers to far fewer;
• Unified server management to ensure maximum efficiency and
performance;
• Reduced power consumption through less processors and better
utilisation of this in use;
• Reduced cooling need, resulting in lower use of air conditioning
plant;
• More rapid redeployment of new systems to meet client needs;
The working
environment is
a fun, friendly,
innovative, exciting
and intellectually
challenging culture...
Annual Report and Accounts 2010/2011 13
dotDigital Group Plc
CORPORATE SOCIAL RESPONSIBILITY REPORT CONTINUED
The Board firmly believes that the
prerequisite for achieving a successful and
sustainable business is integrity in dealing
with customers and business partners.
• More processors per rack resulting in less space demands in
crowded city computer rooms.
Our investment in the latest and most powerful virtualisation
technology is consistent with our offering clients leading digital
solutions whilst genuinely demanding fewer resources.
Everyone at dotDigital Group plc is focused on recycling and
conserving power, but our new equipment really makes a significant
positive contribution. Over the next few years, data-centre power and
cooling demands will become major issues and we are pleased to be
at the forefront of addressing the challenge.
COmmITmENT TO EmpLOYEES
The Board recognises that the Group’s employees are critical to
the overall delivery of its business strategy. All employees are kept
informed of progress against the Group’s strategic plan through regular
meetings, regular newsletters and informal Friday afternoon “Rah Rah”
sessions, where teams from across the whole of the business keep
colleagues from other parts of the business up-to-date with issues
and news. Employees are also invited to attend regular informal lunch
events with the Directors where they are actively encouraged to pose
any questions they may have.
The Directors firmly believe that relations with staff are based on
respect and trust. The Board is committed to creating a working
environment where there is mutual trust and where everyone is
accountable for their own actions and takes full responsibility for the
performance and reputation of the business.
The Board has a policy to ensure that at all times there are equal
opportunities for all employees with no discrimination on account of
race, age, gender, sexual orientation, disability and political or religious
beliefs. Our philosophy is to ensure that ability, contribution to the
business and potential to develop are the determining factors in the
selection, training, career development and promotion of all employees.
The Company operates in a highly competitive environment; therefore
recruitment and retention of first-class employees is critical to the
continued growth of the business. As a result of this need to recruit
the best, the Company strives to ensure its salary packages are
competitive and that there are opportunities for employees to earn
bonuses linked to their performance and the Company’s performance.
Every employee that has passed their probationary period is eligible
to participate in the Company’s employee share option scheme.
Excluding Directors, the total number of options available to
employees at the end of the financial year amounts to 11.4m shares
or 4% of the total shares in issue.
dotDigital is also committed to talent development through the
professional and personal development of our staff combined with
the ability to recruit and develop the best graduates throughout their
career. This commitment goes beyond our existing staff with the
search for new talent being the driver for dotDigital offering internship
and work placement positions for students.
Health and Safety
dotDigital is committed to providing a safe and high-quality working
environment for its staff. The Group engages an external health and
safety consultancy firm to carry out periodic reviews of its offices and
is committed to adopting any recommendations arising. The Group
has complied with all applicable legislation and has not been subject
to sanctions or fines for environmental, health and safety or other
infringements.
bUSINESS ETHICS
The Board believes that operating ethically is vital to the long-term
success of the business and to the well-being of all employees and
stakeholders. All new employees are provided with formal codes of
ethical behaviour as part of their contract of employment. The code
provides guidelines covering personal conduct and gives advice on
recognising and dealing with conflict of interest, business gifts, bribery
and corruption.
All employees are encouraged to report any suspected unethical
behaviour to the Board. If necessary, there is an alternative channel
of communication to the senior independent Director, should this be
more appropriate.
The Directors strive to ensure that the Company has a fair and very
open culture and everyone’s views and contributions are actively
encouraged and respected.
CUSTOmERS AND bUSINESS pARTNERS
The Board firmly believes that the prerequisite for achieving a
successful and sustainable business is integrity in dealing with
customers and business partners. This principle governs all aspect of
the business and is incorporated into the Company’s values.
The Company is passionate about its customers and at all times strives
to safeguard the trust they have provided in the business by complying
with all relevant laws and contractual commitments.
The Company is continually seeking customer feedback through a
variety of formal and informal channels such as user groups, customer
service surveys, in-depth customer interviews and client events.
14
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Annual Report and Accounts 2010/2011
Renault Trucks UK Ltd has been using dotMailer for
nearly two years. The online technology is extremely
intuitive and easy to use, and it is constantly being
updated and improved. All members of the customer
support line are friendly and approachable and always
on hand to help with queries on how to do things, or
to fix the things I can’t, there and then. Our account
manager does a fantastic job of looking after us.
Matt’s very easy going and has a great happy
to help attitude, with much humour along
the way!
Liz Menday
Renault Trucks UK Ltd, Dunstable
The new site is brilliant. Not
only are we increasing basket
value, but converting more
visitors and driving more traffic.
dotCommerce are just blowing
our socks off!”
Maria Hatzistefanis
Rodial
Annual Report and Accounts 2010/2011 15
dotDigital Group Plc
OUR BOARD OF DIRECTORS
pETER SImmONDS FCCA, AGED 53
CHIEF ExECUTIVE AND FINANCE DIRECTOR
Peter Simmonds commenced his career in 1976 as a trainee
accountant with Unilever Plc and has nearly 30 years of experience
at senior management and board level, principally in the areas of
banking, insurance, finance, IT and outsourcing. he has considerable
business entrepreneurial experience having been involved at start up
or early stage of a number of companies in various industry sectors
including consultancy services, vehicle leasing, computer software
and internet solutions sectors.
Peter also has experience of business acquisition and post acquisition
integration and management of businesses.
SImON bIRD, AGED 36,
CHIEF TECHNICAL OFFICER
Simon Bird has developed an in depth technical knowledge of the
internet and its applications. Prior to co-founding dotDigital Group
he assisted in the development of a major internet access provider.
he has provided services to a number of well known companies and
organisations in helping create websites, intranets, extranets, content
management systems and other online solutions.
“TINk “ IAN TAYLOR, AGED 39,
CHIEF OpERATING OFFICER
Tink Taylor has many years experience in the field of interactive
electronic communications. Tink has wide ranging experience in
introducing the concept of digital marketing to companies large
and small. he is the chair of the DMA partnership hub of the email
council and also a member of the Internet Advertising Bureaus
E-communications Council. Tink having judged the DMA awards since
2008, he is now a group leader/chair of the mail category.
“SkIp” GORDON FIDURA, AGED 42,
CLIENT SERVICES DIRECTOR
Skip Fidura joined dotDigital Group in January 2009 with a remit to
build our digital strategy services offering. Skip’s been in marketing for
over 14 years, most recently as Email Partner at OgilvyOne London and
prior to that as the Director of European Operations for Acxiom Digital.
he has worked with clients such as BT, Kodak, hp, Intel, and Travelocity.
co.uk. Skip is also Vice-Chairman of the UK DMA Email Marketing
Council and was listed by Revolution Magazine as one of the 50 most
influential people in new media.
16
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Annual Report and Accounts 2010/2011
OUR NON-ExECUTIVE DIRECTORS
FRANk bEECHINOR-COLLINS, AGED 47
NON-ExECUTIVE CHAIRmAN
Frank Beechinor-Collins, was for 11 years, CEO of One Click hR, an AIM
quoted IT/human Resources business of which he was a Co-founder.
The Company operated in the UK and North America and had around
200 employees. Frank oversaw the successful sale of the business to
ADP, a $4bn NYSE listed company, for US $25m. In notable addition,
Frank was for 5 years, Operations Director of GMCS, part of Grand
Metropolitan, a UK based training services provider, with several
thousand employees. Frank brings a great deal of corporate experience
to the Board, gained over 25 years of working for and running public
and private companies. Frank has a strong track record in M&A and
brings with him a quality network of contacts in the fields of managed
services and Software as a Service (SaaS).
RICHARD kELLETT-CLARkE, AGED 56
NON-ExECUTIVE DIRECTOR
Richard Kellett-Clarke brings to the Board over 25 years of
management experience in the turn round and strategic repositioning
and recovery of creative businesses in CMCG, media, electronics and
software industries. he was a founder of AFx NEWS Limited, now part
of Thomson Reuters, and Sealed Media, now owned by Oracle. he has
held numerous CFO roles in subsidiaries of large PLC’s as well as the
role of IT Director at Financial Times Information. he was part of the
team as CFO which brought Picwick Group PLC to the main market
and Brady Plc to AIM. he is currently the CEO of Idox Plc an AIM listed
specialist software, solutions and KM consultancy business.
NICHOLAS NELSON, AGED 46
NON-ExECUTIVE DIRECTOR
Nicholas Nelson commenced his career in 1985 as a dealer on the floor
of the London Stock Exchange and over the subsequent thirteen years
developed his knowledge of the stock market and its drivers through
roles in securities trading and investment management.
From 1998 his City career continued within the corporate communications
industry, during which time he has assisted numerous smaller companies
with their Financial PR campaigns and IPO programmes. he is currently
Managing Director of hansard Communications Ltd, a financial PR
consultancy.
Annual Report and Accounts 2010/2011 17
dotDigital Group Plc
CORPORATE GOVERNANCE REPORT
dotMailer underlies our success - Equinet is
a content marketing agency and became a
dotMailer White Label customer in 2009. Email
is a vital element of the content marketing
service that we provide to our clients and
the absolutely first class technology, support
and service that we get from dotMailer have
become a key component of our on-going
success. Extraordinary Account Management
- In the three years Nyree has been looking
after our account we have witnessed customer
service at its best. Nyree is relentlessly good
natured, perseveringly patient and a pitch
perfect professional. Frankly, if you could
bottle her I’d have ten.
Jeremy Knight
Equinet Media Ltd, Bedford
The Board have decided to provide corporate governance disclosures
in accordance with the principles and provisions of “The Combined
Code: Principles of Good Governance and the Code of Best Practice”
(“the Code”). As part of this process Turnbull guidelines set out in
“Guidance for Directors on the Combined Code” have also been
reviewed and are covered under “Internal control” below. An
explanation of how dotDigital Group Plc (the “Group”) has applied
the principles and the extent to which the provisions in the Code
have been complied with appears below.
COmpLIANCE STATEmENT
(a) Directors
The details of the Group’s board, together with the audit and
remuneration committees, are set out on page 21 and 22.
The Board meets monthly and is responsible for strategy, performance,
approval of major capital projects and the framework of internal
controls. The Board has a formal schedule of matters reserved for
specific review and decision. To enable the Board to discharge its
duties, all Directors receive appropriate and timely information. Briefing
papers are distributed to all Directors in advance of Board meetings.
All Directors have access to the advice and services of the Company
Secretary, who is responsible for ensuring that Board procedures are
followed and that applicable rules and regulations are complied with.
At the year end there were four Executive Directors, two independent
Non-Executive Directors and an independent Non-Executive Chairman.
The current constitution of the remuneration committee and the audit
committee is shown on page 21 and 22.
Appointments to the Board are nominated by an Executive Director
and then considered by the full Board.
The service contracts of the Executive Directors are less than one year
and determinable by six months notice.
18
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Annual Report and Accounts 2010/2011
It has been great working with you over the last year or so and great
to have an account manager at Dot Agency who has also been a good
laugh along the way. You have always been willing to help me when I
have had no clue and to sort me out with issues which have been above
the normal work load, and I can’t thank you enough for that as it has
helped me and SeeAbility out a lot. You are one of Dot Agency’s star
staff members. (and you can quote me on that) :-)
Helen Moore
Seeability
The Directors acknowledge their responsibilities for the Group’s system
of internal financial control. Such a system can provide reasonable
but not absolute assurance against material misstatement or loss. The
Board confirms that the procedures necessary to comply with the
provisions of the Code, including the guidance of Turnbull, have been
in place throughout the year ended 30th June 2011 and up to the date
of the Directors’ report. It has considered the major business risks and
the control environment. Important control procedures, in addition
to the day to day supervision of the business, include comparison of
monthly management accounts to the budget.
(iii) Audit committee and auditors
The Audit Committee comprises Frank Beechinor-Collins and Nicholas
Nelson and is chaired by Richard Kellett-Clarke. The auditors of the
Group may also attend part or all of each meeting and they have direct
access to the committee for independent discussions, without the
presence of the Executive Director if required. The audit committee
may examine any matters relating to the financial affairs of the Group,
and to the Group’s audit. This includes reviews of the annual accounts
and announcements, accounting policies, compliance with accounting
standards, the appointment and fees of auditors and such other related
functions as the Board may require.
(iv) Going concern basis
After making enquiries, the Directors have formed a judgment, at the
time of approving the financial statements, that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason the
Directors continue to adopt the going concern basis in preparing the
financial statements.
(b) Directors’ remuneration
As set out on page 23 and the remuneration of the Executive Directors
is determined by the Remuneration Committee whilst that of the
Non-Executives is determined by the whole Board. The Directors are
conscious of the importance of the performance related incentives and
bonuses are paid based on performance as deemed appropriate by
the remuneration committee. The remuneration committee use both
financial and non-financial benchmarks to determine the Executive
Director bonuses.
(c) Relations with shareholders
The Group encourages two-way communications with all its
shareholders and responds quickly to all requests or queries received.
All shareholders have at least twenty one working days’ notice of the
annual general meeting at which all of the Directors and the Chairman
are normally available for questions. Comments and questions are
encouraged from the shareholders at the meeting.
(d) Accountability and Audit
(i) Financial reporting
Detailed reviews of the performance and financial position of the
Group are included in the Chief Executive’s statement. The Board uses
this and the Directors’ report on pages 24 to 28 to present a balanced
and understandable assessment of the Group’s position and prospects.
The Directors’ responsibility for the financial statements is described on
page 27.
(ii) Internal control
The Board confirms that it has established the procedures necessary
to implement the guidance set out in
“Internal Control: Guidance for Directors on the Combined Code”. The
process of risk identification, evaluation and management has been
considered by the Board. It is the intention that this will continue to
be kept under constant review and will be considered at each board
meeting in the future. The Board is continuing to take steps to embed
internal control and risk management further into the operations of
the business and to deal with areas of improvement which come to
management and the Board’s attention.
Annual Report and Accounts 2010/2011 19
dotDigital Group Plc
Having worked in e-marketing since the early
days when we wanted to pick a new E-CRM system
to use we certainly did our market research. We
found the dotMailer White Label system to be
the best out there, excellent support, superb
account management and a progressive ongoing
development schedule, all of that alongside a
competitive pricing system made it an excellent
choice for Idealogy and our clients.
Simon Johnson
Idealogy Group Ltd, Southampton
When we first decided to offer permission-based
email marketing services, finding the right partner
was crucial and dotMailer impressed us from the start.
With a dedicated, and helpful, account manager we
had one individual contact to discuss our needs and
to get us through the initial learning curve. Whether
using dotMailer templates, or building campaigns
from scratch, the system was easy for our designers
and copywriters to work together to create targeted
and effective campaigns. Safeguards are built in to
ensure mailing lists are compliant and local and global
suppression facilities are great features to protect our
(and our client’s) reputations. Clients love the cost
saving, speed, personalisation, regular performance
reports and measurable ROI – and you don’t get that
with Direct Mail. Email marketing is now one
of our most popular client services and the
demand is growing. What makes dotMailer
a winner for us? Ease of use, value for money
and great support.
Nick Spiteri
Positive Advertising Ltd
20
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Annual Report and Accounts 2010/2011
AUDIT COMMITTEE REPORT
The Audit Committee is a sub-committee of the Board whose
responsibilities include:
• Reviewing the half-yearly and full year accounts and results
announcements of the Company and any other formal
announcements relating to the Company’s financial performance
and recommending them to the Board for approval;
• Reviewing the Group’s systems for internal financial control and
risk management;
• Monitoring and reviewing the effectiveness of the Group’s internal
accounting function and considering regular reports which arise;
• Considering the appointment of the external auditors, overseeing
the process for their selection and making recommendations to the
Board in relation to their appointment to be put to shareholders for
approval at a general meeting;
• Monitoring and reviewing the effectiveness and independence of
the external auditors, agreeing the nature and scope of their audit,
agreeing their remuneration, and considering their reports on the
Group’s accounts, reports to shareholders and their evaluation of
the systems of internal financial control and risk management.
COmpOSITION OF THE AUDIT COmmITTEE
The Audit Committee comprises of Nicholas Nelson, Frank Beechinor-
Collins and Richard Kellet-Clarke. The Chairman of the Audit
Committee is Richard Kellett-Clarke. The Committee meets separately
with the external auditors without management being present.
The Secretary to the committee is Milan Patel, the Company Secretary.
mAIN ACTIVITIES OF THE AUDIT COmmITTEE
At its meeting on the 27th September 2011 the Committee reviewed
the Group’s preliminary announcement of its results for the financial
year 30th June 2011 and the draft report and accounts for that
year. The Committee received reports from the external auditors on
the conduct of their audit, their review of the accounts, including
accounting policies and areas of judgment, and their comments
on risk management and control matters. The Group’s corporate
social responsibility reporting arrangements and procedures were
also reviewed.
The external auditors also presented their proposed fees and scope
for the forthcoming year’s audit. The Committee also reviewed the
performance of both the internal accounting function and external
auditors. The review of the external auditors was used to confirm the
appropriateness of their reappointment and included assessment
of their independence, qualification, expertise and resources, and
effectiveness of their audit process.
The Audit Committee also reviewed the effectiveness of the
Company’s systems for internal financial control and risk management.
The Committee reviewed the Group’s credit control procedures and
risks concerning IT controls.
INDEpENDENCE OF ExTERNAL AUDITORS
Both the Board and the external auditors have safeguards in place to
avoid the possibility that the auditors’ objectivity and independence
could be compromised. Our policy in respect of services provided by
the external auditors is as follows:
• Audit related services – the external auditors are invited to
provide services which, in their position as auditors, they must
or are best placed to undertake. This includes formalities relating
to borrowings, shareholders’ and other circulars, various other
regulatory reports and work in respect of acquisitions and disposals;
• Tax consulting – in cases where they are best suited, we use the
external auditors. All other significant tax consulting work is put
out to tender;
• General consulting – in recognition of public concern over the
effect of consulting services on auditors’ independence, our policy
is that the external auditors are not invited to tender for general
consulting work.
INTERNAL mANAGEmENT ACCOUNTING
The Audit Committee reviewed the performance of the internal
accounting function, the department’s resource requirements and
also approved the internal budgets for the year ended 30th June
2011 which appeared both prudent and realistic in the context of
the Group’s ambitions.
On behalf of the Committee:
Richard Kellett-Clarke
Chairman of the Audit Committee
Annual Report and Accounts 2010/2011 21
dotDigital Group Plc
REMUNERATION COMMITTEE REPORT
THE REmUNERATION COmmITTEE
The Remuneration Committee was established to keep under review
the remuneration and terms of employment of Executive Directors and
to recommend such remuneration and terms and changes thereof to
the Board. The Committee’s composition, responsibilities and operation
comply with the Combined Code. In forming its remuneration policy,
the Committee confi rms that it has complied with the Combined
Code. The Committee comprised Frank Beechinor-Collins (Chairman),
Richard Kellett-Clarke, Nicholas Nelson and Peter Simmonds. Peter
Simmonds being an Executive Director cannot comment upon his
own remuneration.
The Secretary to the committee is Milan Patel, the Company Secretary
REmUNERATION pOLICY
The Group’s executive remuneration policy objectives are:
(a) To ensure that individual rewards and incentives are directly aligned
with the performance of the Group and that of the interests of the
shareholders; and
(b) To maintain a competitive program which enables the Group to
attract and retain high caliber executives.
SERVICE CONTRACTS
On 7th January 2009, the Executive Directors each entered into a
service contract with the Group, the terms of which commenced
upon Admission to PLUS Markets on the 2nd of February 2009. Each
appointment runs for one year from that date and is terminable by
six months’ notice by either party to expire at the end of that year or
at any time thereafter. The agreement contains restrictive covenants.
Upon termination, no benefi ts (other than those accruing during the
notice period) are due to the Director.
EmpLOYEE INCENTIVE SCHEmES
The Group has awarded share options under EMI, approved share
option schemes to key employees who had completed their probation
period at the date of grant. The board considers the performance of
staff in conjunction with the performance of staff in conjunction with
the performance of staff in conjunction with the performance of the
Group during the, bi-annual review process. Discretionary bonuses are
awarded based on individual and Group performance.
Approved by the Remuneration Committee
Signed on its behalf by
Frank Beechinor-Collins
Frank Beechinor-Collins
Chairman of Remuneration Committee
22
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Annual Report and Accounts 2010/2011
DIRECTORS’ EmOLUmENTS
Executive Director
P Simmonds
I Taylor
S Bird
G Fidura
Executive Director
P Simmonds
I Taylor
S Bird
G Fidura
12m period ended 30.6.11
Salary/Fees
Benefits
100,834
102,500
102,500
76,000
5,523
6,757
6,757
4,200
Bonus
60,000
45,000
55,000
21,000
Pension
10,817
10,458
10,458
2,280
Total
177,173
164,715
174,715
103,480
381,834
23,237
181,000
34,013
620,083
Salary/Fees
Benefits
Bonus
Pension
Total
12m period ended 30.6.10
88,000
95,000
95,000
76,000
7,103
6,757
6,757
4,200
354,000
24,817
25,000
30,000
10,000
6,250
71,250
8,808
9,500
9,500
-
128,911
141,257
121,257
86,450
27,808
477,875
DIRECTORS’ INTERESTS
The respective interests, all of which are beneficial, in the shares of the Company for the members of the Board at the year end and subsequent to
that date are stated below:
Executive Director
P Simmonds*
I Taylor
S Bird
No. of Shares held
as at 30.06.11
19,943,333
60,860,000
52,860,000
133,663,333
% holding
7.25%
22.13%
19.22%
48.6%
* 4.90% of Peter Simmonds holdings/voting rights has been held by Frank Nominees Limited who acts as the nominee for Alliance Trust Pensions
Limited, which is the trustee of a SIPP established by Peter Anthony Simmonds. Frank Nominees is the vehicle used by Kleinwort Benson Limited
to hold securities for clients, trusts, SIPP’s etc. The beneficiary of the SIPP is Peter Anthony Simmonds.
DIRECTORS’ INTERESTS IN SHARE OpTIONS
Under the Group’s executive share option scheme the following Directors have the right to acquire Ordinary shares.
Executive Director
G. Fidura
Grant Date
No. of Share option
Granted
Option price
(Pence)
Date first
Exercisable
Expiry
Date
22/10/2009
11/11/2010
800,000
800,000
5.0
01/07/2010
01/02/2019
5.13
01/05/2012
31/12/2015
23
dotDigital Group Plc Annual Report and Accounts 2010/2011
REPORT OF ThE DIRECTORS’
The Directors present their report with the financial statements of
the Company and the Group for the year ended 30th June 2011.
pRINCIpAL ACTIVITY
The principal activity of the Group in the year under review was that
of digital marketing.
REVIEW OF bUSINESS
During the year the Group has shown significant growth in customer
numbers, sales, and profits. Revenues grew from £6.0m in the year
ended June 2010 to £9.0m for the year ended June 2011, an increase
of 49%.
Post-tax profits grew from £1.14m in 12m to June 2010 to £1.81m
(excluding exceptional items) for the year ended June 2011, an
increase of 59%.
kEY pERFORmANCE INDICATORS
The operations as a whole and the individual business units are
managed and controlled using a variety of key performance indicators
appropriate to the goals they have been set. Examples of key
performance indicators are:
Revenue
Research and
development expenses
Adjusted EPS
Email sends volume
Email sends value
New customers in the year
2009
4.7m
0.2m
-
422m
2.4m
905
2010
6.0m
0.3m
0.44p
663m
3.5m
1,150
2011
9.0m
0.6m
0.78p
1,045m
5.0m
1,470
kEY RISkS & UNCERTAINTIES
(i) Supplier, computer hardware and internet reliability related risks
The Group rents space for its servers located at hosting centres
and purchases bandwidth from service providers in the UK to run
the software and services it supplies. Although, it spreads the risk
of computer hardware failure across multiple servers in multiple
hosting centres and to date, there have been no significant failures,
there is no assurance of continuity of supply. An event resulting in a
hosting centre going off-line for any significant period of time or the
termination of provision of services by one of those hosting centres
for any reason may result in significant loss of revenues and therefore
materially harm the Group’s business, operating results and financial
condition. Similarly, events preventing or obstructing the servers from
communicating over the internet, such as the future availability of a
finite number of IP addresses, may restrict the capacity of the business.
(ii) ISP reputation related risks
A significant proportion of the Group’s revenue is currently derived by
charging a price per email for sending marketing emails on behalf of
commercial marketing departments. The largest volume senders of
emails tend to be companies sending to consumers.
The EU anti-spam regulations and US CAN SPAM laws place restrictions
on what and when companies are allowed to send marketing emails
to consumers. dotMailer rents the use of its software and servers for
clients to upload their own email lists and send their email marketing
campaigns. dotMailer acts as the data processor in all instances
and neither owns lists nor provides third parties with data and is
therefore not directly liable for any breaches of the EU or US anti-spam
regulations. however, where clients are considered by email recipients
to be sending unwanted emails, there is an inherent mechanism within
most emails to make a complaint against the sender. The level or
number of complaints is recorded by the larger ISP’s (hotmail, Yahoo,
AOL etc) against the IP address of the server sending the email. This
complaint rate record establishes the reputation of each IP address.
An IP address with a poor reputation may not get a high level of
delivery of emails.
dotMailer closely monitors the complaint rates for each of its clients
and reacts quickly and accordingly to stop rogue campaigns.
however, if too many new clients create and send campaigns which
attract high complaint rates, the reputation of dotMailer’s sending IP
addresses could be diminished. This diminished reputation could affect
dotMailer’s ability to win or retain new clients and therefore could
significantly affect its planned growth in revenues.
dotMailer also faces risks from commercial and non-commercial anti
spam services. There are a number of organisations who provide
a service to individuals and companies to help them reduce spam
in their inbox; examples include Spamhaus and Spamcop. These
organisations allow individuals to report an email as spam. This
reporting can rapidly propagate the blacklisting of an IP address
or domain used to send the reported email. This could impact on
dotMailer’s ability to deliver emails on behalf of other clients which
could in turn impact on revenues.
24
www.dotdigitalgroup.com Annual Report and Accounts 2010/2011
During the year the Group has shown
significant growth in customer numbers, sales,
and profits. Revenues grew from £6.0m in the
year ended June 2010 to £9.0m for the year
ended June 2011, an increase of 49%.
It is also to be noted that as the ISP communities adopt ever tougher
measure to deal with the problem of spam there is a risk that genuine
marketing emails could be falsely labelled as spam and do not get
delivered to the intended recipients.
Whilst the Group will continue to strive to ensure it is able to deliver
products and services that meet the needs of its target clients, there
is a risk that competitors may be first to the market with products that
entice clients away from dotMailer.
(iii) Hacking & information security
Although in the opinion of the Group’s Directors, the technical team
at the Group takes sensible precautions against intrusions and loss of
data and dotMailer employs a security manager to mitigate this risk,
there is a possible risk that a hacking attack could result in a denial of
service or loss of data.
(iv) Competitive environment
Although the Group’s revenues have consistently grown year on year,
it competes in a competitive sector. Some of its competitors and
potential competitors may have advantages over it in terms of financial
backing, business size, broader brand recognition and coverage of
other geographic markets globally. Their capacity to leverage their
marketing expenditures across a broader range of potential customers,
form relationships with brand owners or make acquisitions of
complimentary products inherently increases the risk to the Group‘s
business model.
(v) Hire and retain key personnel
The Group depends on the continued contributions of the Group’s
senior management and other key personnel. The loss of the services
of any of these executive officers or other key employees could harm
the Group’s business.
The future success of the Group also depends on its ability to
identify, attract and retain highly skilled technical, managerial and
sales personnel. The Group faces intense competition for qualified
individuals from numerous technology and marketing companies.
(vi) Development of products
The digital marketing industry is fast paced and rapidly adopts
developing technologies. In order to stay competitive the Group needs
to deploy resources to research and development activity and to
constantly innovate.
The Group’s growth will depend upon the development,
commercialisation and marketing of new products. If this is not done
successfully, then the growth of the Group may be impaired. There
is also a risk that this activity may not result in a leading edge or
competitive products being brought to market in time to maintain a
competitive advantage. The Group may be unsuccessful in its efforts to
develop products.
DIVIDENDS
No dividends will be distributed for the year ended 30th June 2011.
It is the Directors strategy to achieve capital growth on the strength
of a consistent cash generative trading performance. During the
last financial year cash reserves grew as a result of strong trading
performance. Accordingly, the Directors believe that it is inappropriate
to propose a dividend based on this strategy to invest in further
growth.
FUTURE OUTLOOk
The Group provides digital marketing services across a range of areas.
Each of these areas have shown market growth significantly above
that of the UK economy. The Board believes that our widespread
brand recognition and strong product range will continue to present
opportunities to expand and diversify profitability in the coming year.
SHARE CONSOLIDATION
All shareholdings quoted in financial statements reflect the effect of
the share consolidation undertaken by the Group on 10th February
2011(see note 16). The consolidation has been applied from 1st July
2009 for comparative purposes and therefore the prior period figures
have been amended.
DIRECTORS
The Directors shown below have held office during the whole of the
period from 1st July 2010 to the date of this report.
• S Bird
• N C P Nelson
• P A Simmonds
•
I Taylor
• G Fidura
Other changes in Directors holding office are as follows:
• D J Pacy - resigned 31st December 2010
• R Kellett-Clarke - appointed 13th June 2011
• F Beechinor-Collins - appointed 5th May 2011
25
dotDigital Group Plc Annual Report and Accounts 2010/2011 REPORT OF ThE DIRECTORS’ CONTINUED
The Directors who served during the period and their beneficial interests in the shares of the Group as recorded in the Register of Directors’
interests at 30th June 2011 are as follows:-
Directors
S Bird
I Taylor
P Simmonds
N Nelson
D Pacy (resigned 31 December 2010)
G Fidura
F Beechinor-Collins
R Kellett-Clarke
30.6.11
Number of
shares held
Percentage
Shareholding
%
52,860,000
60,860,000
19,943,333*
4,075,000
7,500,002
-
674,194**
-
19.22
22.13
7.25
1.48
2.73
-
0.25
-
30.6.10
Number of
shares held
52,860,000
60,860,000
13,060,000
5,525,000
7,500,000
-
-
-
Percentage
Shareholding
%
20.45
23.36
5.01
2.12
2.88
-
-
-
* Frank Nominees Limited hold 4.90% in respect of Peter Simmonds holding/voting rights act as nominee for Alliance Trust Pensions Limited. Frank
Nominees is a vehicle used by Kleinwort Benson Limited to hold securities for clients, trusts, SIPP’s etc. The beneficiary of the SIPP is Peter Anthony
Simmonds.
** The 674,194 shares shown as being held by Mr Beechinor-Collins are owned by the Curra Trust, a trust established for the benefit of his children
and in which he has no beneficial interest.
The Directors who served during the period and their beneficial interests in share options in the Group, as recorded in the register of Directors’
interests as at 30th June 2011 are as follows:-
Executive Directors
P Simmonds
G Fidura
30.6.11
Number of
options held
30.6.10
Number of
options held
-
8,333,333
800,000
800,000
During the year P Simmonds exercised the options held with the share price on the date of exercise being 7p. See note 16 regarding the
Ordinary Shares issued in exchange for the options.
26
www.dotdigitalgroup.com Annual Report and Accounts 2010/2011
When considering our email provider, dotMailer
stood out from the rest, not only in terms of
quality and feature set, but the support received
initially through Christian and this last year or so
through Matthew, who has helped us to use the
system effectively, providing our customers with
a reflected service offering, making our company
look extremely professional. We can’t speak highly
enough of Matthew or the email platform.
Daniel Lack
Intelligent VC, Hertfordshire
SUbSTANTIAL INTERESTS
On 26th September 2011, the following parties had notified the Group of a beneficial interest that represents 3% or more of the Group’s issued
share capital at that date:
Shareholders
I Taylor
S Bird
Newedge Group SA
Legal and General Group PLC
BlackRock Inc.
P Simmonds
BlackRock Smaller Companies Trust PLC
C Potts
2011
Number of
shares held
Percentage
Shareholding
%
53,860,000
45,860,000
31,400,000
28,500,000
26,428,430
19,943,333
10,275,494
10,000,000
19.59
16.68
11.42
10.36
9.61
7.25
3.74
3.64
GROUp’S pOLICY ON pAYmENT OF CREDITORS
The Group does not have a formal code that it follows with regard to
payments to suppliers. It agrees payments terms with its suppliers at
the time it enters in to binding purchasing contracts for the supply of
goods and services. The Company seeks to abide by these payment
terms whenever it is satisfied that the supplier has provided the goods
or services in accordance with agreed terms and conditions. The
average days credit for the year is 25 (2010 – 25 days).
pUbLICATION OF ACCOUNTS ON COmpANY WEbSITE
Financial statements are published on the Company’s website. The
maintenance and integrity of the website is the responsibility of the
Directors. The Directors’ responsibility also extends to the financial
statements contained therein.
INDEmNITY OF OFFICERS
The Group purchases directors and officers insurance against their
costs in defending themselves in legal proceedings taken against
them in that capacity, and in respect of damages resulting from the
unsuccessful defence of any proceedings.
FINANCIAL INSTRUmENTS
Details of the Group’s risk management objectives and policies
together with it’s exposure to financial risk are set out in note 21 to the
financial statements.
The purpose of the policies is to ensure that adequate cost effective
funding is available to the Group and exposure to financial risk –
interest rate, liquidity and credit risk is minimised.
RESEARCH AND DEVELOpmENT
In the markets in which the Group operates, effective research
and development is vital to maintaining competitive advantage
and securing future income streams.
GOING CONCERN
After making appropriate enquires, the Directors consider that the
Company and the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason they
continue to adopt the going concern basis when preparing the
financial statements.
EVENTS AFTER THE REpORTING pERIOD
There are no events after the date of this report or the date the
financial statements were approved by the Board of Directors which
impact on the figures as presented.
LISTING
The Group’s Ordinary Shares have been traded on London Alternative
Investment Market (AIM) since 29th March 2011. Zeus Capital are
the Group’s nominated advisors and together with Charles Stanley
Securities are the joint brokers. The closing mid market share price at
30th June 2011 was 7.125p (2010: 5.25p after adjusting the price for
the share consolidation made reference to in the notes.)
STATEmENT OF DIRECTORS’ RESpONSIbILITIES
The Directors are responsible for preparing the Report of the
Directors and the financial statements in accordance with applicable
laws and regulations.
27
dotDigital Group Plc Annual Report and Accounts 2010/2011
REPORT OF ThE DIRECTORS’ CONTINUED
Company law requires the Directors to prepare fi nancial statements
for each fi nancial year. Under that law the Directors have elected to
prepare the fi nancial statements in accordance with International
Financial Reporting Standards as adopted by the European Union.
Under company law the Directors must not approve the fi nancial
statements unless they are satisfi ed that they give a true and fair
view of the state of aff airs of the Company and the Group and of the
profi t or loss of the Group for that period. In preparing these fi nancial
statements, the Directors are required to:
• Select suitable accounting policies and then apply them
consistently;
STATEmENT AS TO DISCLOSURE OF INFORmATION TO AUDITORS
So far as the Directors are aware, there is no relevant audit information
(as defi ned by Section 418 of the Companies Act 2006) of which the
Group’s auditors are unaware, and each Director has taken all the steps
that he ought to have taken as a Director in order to make himself
aware of any relevant audit information and to establish that the
Group’s auditors are aware of that information.
AUDITORS
The auditors, Jeff reys henry LLP, will be proposed for re-appointment
at the forthcoming Annual General Meeting.
• Make judgements and accounting estimates that are reasonable
On behalf of the Board
and prudent;
• State whether the Group and parent Company fi nancial statements
have been prepared in accordance with IFRS’s as adopted by the
European Union subject to any material departures disclosed and
explained in the fi nancial statements;
• Prepare the fi nancial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records
that are suffi cient to show and explain the Company’s and the Group’s
transactions and disclose with reasonable accuracy at any time the
fi nancial position of the Company and the Group and enable them
to ensure that the fi nancial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
peter Simmonds
Director
12th October 2011
Email marketing has become an
integral part of our business and helps
us communicate important environmental
messages whilst raising our profi le. It also allows
to reach a huge client database. We have been
using dotMailer since 2009 and have enjoyed
the ease and excellent standard of creating and
sending newsletters and tracking the results.
Matthew has been our account manager for over
a year and has been a consistently helpful and
always willing to solve any problems that we
have encountered.
Ruqayya Ferry
Global Action Plan , London
28
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
INDEPENDENT AUDITORS’ REPORT
We have audited the financial statements of dotDigital Group Plc for
the year ended 30th June 2011, which comprise the consolidated
income statement, consolidated statement of comprehensive income,
consolidated statement of changes of equity, company statement
of changes in equity, consolidated statement of financial position,
company statement of financial position, consolidated statement of
cash flows, company statement of cash flows and the related notes.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union, and as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditors report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
RESpECTIVE RESpONSIbILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Statement of Directors’ Responsibilities,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit the financial statements in accordance
with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
SCOpE OF THE AUDIT OF THE FINANCIAL STATEmENTS
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that
the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s and the Parent
Company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the presentation of the financial
statements. In addition, we read all the financial and non-financial
information in the Chairman’s and Chief Executive’s report, Corporate
Social Responsibility report, Corporate Governance report, Audit
Committee report, Remuneration Committee report and Directors
report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
OpINION ON FINANCIAL STATEmENTS
In our opinion the financial statements:
• Give a true and fair view of the state of the Group’s and the Parent
Company’s affairs as at 30th June 2011 and of the Group’s profit and
Group’s and Parent Company’s cash flow for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted
by the European Union;
• The parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union and as applies in accordance with the provisions of the
Companies Act 2006; and
• The financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
OpINION ON OTHER mATTER pRESCRIbED
bY THE COmpANIES ACT 2006
In our opinion the information given in the Report of the Directors for
the financial year for which the financial statements are prepared is
consistent with the financial statements.
mATTERS ON WHICH WE ARE REQUIRED
TO REpORT bY ExCEpTION
We have nothing to report in respect of the following matters where
the Companies Act 2006 requires us to report to you if, in our opinion:
• Adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• The Parent Company financial statements are not in agreement
with the accounting records and returns; or
• Certain disclosures of Directors’ remuneration specified by law are
not made; or
• We have not received all the information and explanations we
require for our audit.
Sanjay parmar (Senior Statutory Auditor)
for and on behalf of Jeffreys henry LLP, Statutory Auditor
Chartered Accountants and Registered Auditors
Finsgate 5-7 Cranwood Street, London, EC1V 9EE
12th October 2011
Annual Report and Accounts 2010/2011 29
dotDigital Group Plc
CONSOLIDATED INCOME STATEMENT
FOR ThE YEAR ENDED 30Th JUNE 2011
CONTINUING OpERATIONS
Revenue
GROSS pROFIT
Administrative expenses
OpERATING pROFIT bEFORE ExCEpTIONAL ITEmS
Exceptional items: Cost relating to listing on AIM
OpERATING pROFIT
Finance costs
Finance income
pROFIT bEFORE INCOmE TAx
Income tax expense
pROFIT FOR THE YEAR
Profit attributable to:
Owners of the parent
Earnings per share expressed in pence per share:
Basic
Adjusted
Diluted
Notes
30.6.11
£
30.6.10
£
8,952,488
6,014,101
8,952,488
6,014,101
(6,647,493)
(4,638,328)
2,304,995
1,375,773
(119,826)
-
2,185,169
1,375,773
(1,468)
1,127,862
(1,607)
3,088
3,311,563
1,377,254
(273,743)
(233,104)
3,037,820
1,144,150
3,037,820
1,144,150
1.16
0.78
0.72
0.44
0.44
0.41
5
5
6
7
9
CONSOLIDATED STATEMENT OF COMPREhENSIVE INCOME
FOR ThE YEAR ENDED 30Th JUNE 2011
pROFIT FOR THE YEAR
OTHER COmpREHENSIVE INCOmE
TOTAL COmpREHENSIVE INCOmE FOR THE YEAR
TOTAL COmpREHENSIVE INCOmE ATTRIbUTAbLE TO:
OWNERS OF THE pARENT
30.6.11
£
30.6.10
£
3,037,820
1,144,150
-
-
3,037,820
1,144,150
3,037,820
1,144,150
30
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR ThE YEAR ENDED 30Th JUNE 2011
ASSETS
NON-CURRENT ASSETS
Goodwill
Intangible assets
Property, plant and equipment
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY ATTRIbUTAbLE TO THE
OWNERS OF THE pARENT
Called up share capital
Share premium
Unissued share capital
Reverse acquisition reserve
Other reserves
Retained earnings
TOTAL EQUITY
LIAbILITIES
NON-CURRENT LIAbILITIES
Trade and other payables
Financial instruments
Financial liabilities – borrowings
Interest bearing loans
CURRENT LIAbILITIES
Trade and other payables
Financial liabilities - borrowings
Interest bearing loans and borrowings
Tax payable
TOTAL LIAbILITIES
TOTAL EQUITY AND LIAbILITIES
Notes
30.6.11
£
30.6.10
£
10
11
12
14
15
16
17
17
17
17
17
19
22
18
19
4,120,561
990,557
238,124
4,120,561
559,082
173,120
5,349,242
4,852,763
1,658,044
2,568,265
1,234,645
1,277,617
4,226,309
2,512,262
9,575,551
7,365,025
1,374,861
4,737,053
-
(4,695,465)
70,160
5,734,342
1,292,500
4,533,754
152,660
(4,695,465)
29,493
2,696,522
7,220,951
4,009,464
1,243,492
2,366,320
-
6,319
1,007,743
668,764
6,076
97,289
1,111,108
12,151
302,007
982,922
2,354,600
3,355,561
9,575,551
7,365,025
The fi nancial statements were approved and authorised for issue by the Board of Directors on 12th October 2011 and were signed on its
behalf by
peter Simmonds
Director
Company registration number: 06289659 (England and Wales)
Annual Report and Accounts 2010/2011 31
dotDigital Group Plc
COMPANY STATEMENT OF FINANCIAL POSITION
FOR ThE YEAR ENDED 30Th JUNE 2011
ASSETS
NON-CURRENT ASSETS
Investments
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY ATTRIbUTAbLE TO THE
OWNERS OF THE pARENT
Called up share capital
Share premium
Unissued share capital
Other reserves
Retained earnings
TOTAL EQUITY
LIAbILITIES
NON-CURRENT LIAbILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings
CURRENT LIAbILITIES
Trade and other payables
TOTAL LIAbILITIES
TOTAL EQUITY AND LIAbILITIES
Notes
30.6.11
£
30.6.10
£
13
8,704,468
8,704,468
8,704,468
8,704,468
14
15
16
17
17
17
17
19
18
25,746
235,274
261,020
4,826
385,332
390,158
8,965,488
9,094,626
1,374,861
4,737,053
-
70,160
498,060
1,292,500
4,533,754
152,660
29,493
(329,205)
6,680,134
5,679,202
1,243,492
2,366,320
1,041,862
1,049,104
2,285,354
3,415,424
8,965,488
9,094,626
The fi nancial statements were approved and authorised for issue by the Board of Directors on 12th October 2011 and were signed on its
behalf by
peter Simmonds
Director
Company registration number: 06289659 (England and Wales)
32
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
CONSOLIDATED STATEMENT OF ChANGES IN EqUITY
FOR ThE YEAR ENDED 30Th JUNE 2011
bALANCE AT 1ST jULY 2009
Profit for the year
Total comprehensive income
bALANCE AT 30TH jUNE 2010
Issue of share capital
Reclassification of equity
Transactions with owners
Profit for the year
Transactions with owners
bALANCE AT 30TH jUNE 2011
bALANCE AT 1ST jULY 2009
Share based payment
Equity on acquisition
Transactions with owners
Profit for the year
Total comprehensive income
bALANCE AS AT 30TH jUNE 2010
Issue of share capital
Share based payment
Reclassification of equity
Transactions with owners
Profit for the year
Total comprehensive income
bALANCE AT 30TH jUNE 2011
Share
capital
£
1,292,500
-
-
Retained
earnings
£
1,552,372
1,144,150
1,144,150
Share
premium
£
4,533,754
-
-
1,292,500
2,696,522
4,533,754
67,467
14,894
82,361
-
-
-
-
-
3,037,820
3,037,820
65,533
137,766
203,299
-
-
1,374,861
5,734,342
4,737,053
Unissued
share
capital
£
-
-
152,660
152,660
-
-
Reverse
acquisition
reserve
£
(4,695,465)
-
-
-
-
-
Other
reserves
£
5,302
24,191
-
24,191
-
Total
equity
£
2,688,463
24,191
152,660
176,851
1,144,150
-
1,144,150
152,660
(4,695,465)
29,493
4,009,464
-
-
(152,660)
(152,660)
-
-
-
-
-
-
-
-
-
-
40,667
-
40,667
-
133,000
40,667
-
173,597
3,037,820
-
3,037,820
(4,695,465)
70,160
7,220,951
• Share capital is the amount subscribed for shares at nominal value.
• Share premium represents the excess of the amount subscribed for share capital over the nominal value of the net share issue expenses.
• Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
• Unissued share capital relate to the shares due to be issued in relation to the acquisition of Netcallidus Limited
• The reverse acquisition reserve relates to the adjustment required to account the reverse acquisition in accordance with International
Financial Reporting Standards.
• Other reserves relate to the charge for the share based payment in accordance with International Financial Reporting Standard 2.
Annual Report and Accounts 2010/2011 33
dotDigital Group Plc
COMPANY STATEMENT OF ChANGES IN EqUITY
FOR ThE YEAR ENDED 30Th JUNE 2011
bALANCE AT 1ST jULY 2009
Deficit for the year
Total comprehensive income
bALANCE AT 30TH jUNE 2010
Issue of share capital
Reclassification of equity
Transactions with owners
Profit for the year
Total comprehensive income
bALANCE AT 30TH jUNE 2011
bALANCE AT 1ST jULY 2009
Share based payment
Equity on acquisition
Transactions with owners
Deficit for the year
Total comprehensive income
bALANCE AT 30TH jUNE 2010
Issue of share capital
Reclassification of equity
Share based payment
Transactions with owners
Profit for the year
Total comprehensive income
bALANCE AT 30TH jUNE 2011
Share
capital
£
1,292,500
-
-
Retained
earnings
£
(148,728)
(180,477)
(180,477)
Share
premium
£
4,533,754
-
-
1,292,500
(329,205)
4,533,754
67,467
14,894
82,361
-
-
-
-
-
827,265
827,265
65,533
137,766
203,299
-
-
1,374,861
498,060
4,737,053
Unpaid
Share
capital
£
-
-
152,660
152,660
-
-
152,660
-
(152,660)
-
(152,660)
-
-
-
Other
reserves
£
5,302
24,191
-
24,191
-
-
Total
equity
£
5,682,828
24,191
152,660
176,851
(180,477)
(180,477)
29,493
5,679,202
-
-
40,667
40,667
-
-
133,000
-
40,667
173,667
827,265
827,265
70,160
6,680,134
• Share capital is the amount subscribed for shares at nominal value.
• Share premium represents the excess of the amount subscribed for share capital over the nominal value of the net share issue expenses.
• Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
• Unissued share capital relate to the shares due to be issued in relation to the acquisition of Netcallidus Limited
• Other reserves relate to the charge for the share based payment in accordance with International Financial Reporting Standard 2.
34
www.dotdigitalgroup.com
Annual Report and Accounts 2010/2011
CONSOLIDATED STATEMENT OF CASh FLOWS
FOR ThE YEAR ENDED 30Th JUNE 2011
CASH FLOWS FROm OpERATING ACTIVITIES
Cash generated from operations
Interest paid
Tax paid
NET CASH GENERATED FROm OpERATING ACTIVITIES
CASH FLOWS FROm INVESTING ACTIVITIES
Purchase of goodwill
Purchase of intangible fixed assets
Purchase of tangible fixed assets
Interest received
Funds acquired from acquisition
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROm FINANCING ACTIVITIES
Loan repayments in period
Amount withdrawn by Directors
Share issues
NET CASH GENERATED FROm FINANCING ACTIVITIES
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT bEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
COMPANY STATEMENT OF CASh FLOWS
FOR ThE YEAR ENDED 30Th JUNE 2011
CASH FLOWS FROm OpERATING ACTIVITIES
Cash generated from operations
NET CASH FROm OpERATING ACTIVITIES
CASH FLOWS FROm INVESTING ACTIVITIES
Purchase of fixed asset investments
NET CASH FROm INVESTING ACTIVITIES
CASH FLOWS FROm FINANCING ACTIVITIES
Loan from/(to) Group
Share issue
NET CASH FROm FINANCING ACTIVITIES
DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT bEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
Notes
26
30.6.11
£
30.6.10
£
2,462,734
(1,468)
(478,461)
1,275,938
(1,607)
(182,614)
1,982,805
1,091,717
-
(657,172)
(160,624)
5,034
-
(1,000,000)
(405,725)
(115,556)
3,088
41,407
(812,762)
(1,476,786)
(12,395)
-
133,000
120,605
(11,912)
(3,304)
-
(15,216)
1,290,648
(400,285)
27
27
1,277,617
1,677,902
2,568,265
1,277,617
30.6.11
£
30.6.10
£
28
(257,589)
(139,637)
(257,589)
(139,637)
-
-
(1,000,000)
(1,000,000)
(25,469)
133,000
107,531
960,438
-
960,438
(150,058)
(179,199)
385,332
235,274
564,531
385,332
29
29
Annual Report and Accounts 2010/2011 35
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS
FOR ThE YEAR ENDED 30Th JUNE 2011
1. GENERAL INFORmATION
dotDigital Group Plc (“dotDigital”) is a company Incorporated
England and Wales and quoted on the AIM Markets. The address of
the registered office is disclosed on inside back cover of the financial
statements. The principle activity of the Group is described on page 24.
2. ACCOUNTING pOLICIES
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards and IFRIC interpretations
and with those parts of the 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 Accountancy Standards Board and
International Accounting Interpretations Committee effective at the
time of preparing the financial statements.
The financial statements are presented in sterling (£), rounded to the
nearest pound.
Issued International Financial Reporting Standards (IFRS’s) and
interpretations (IFRICS) relevant to company operations.
The following interpretations to published standards is mandatory for
accounting periods beginning on or after 1st July 2010.
IFRS 3 (revised), ‘Business combinations’ and consequential
amendments to IAS 27, ‘Consolidated and separate financial
statements’, IAS 28, ‘Investments in associates’ and IAS 31, ‘Interests
in joint ventures’, effective prospectively to business combinations
for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after 1st July 2009.
The revised standard continues to apply the acquisition method to
business combinations, with some significant changes. For example,
all payments to purchase a business are to be recorded at fair value
at the acquisition date, with contingent payments classified as debt
subsequently re-measured through the statement of comprehensive
income. There is a choice on an acquisition-by-acquisition basis to
measure the minority interest in the acquiree either at fair value or at
the minority interest’s proportionate share of the acquiree’s net assets.
All acquisition-related costs should be expensed. This amendment will
have no impact on the Company.
IAS 27 (revised), ‘Consolidated and separate financial statements’,
(effective from 1st July 2009). The revised standard requires the effects
of all transactions with non-controlling interests to be recorded in
equity if there is no change in control and these transactions will no
longer result in goodwill or gains and losses. The standard also specifies
the accounting when control is lost. Any remaining interest in the
entity is re-measured to fair value, and a gain or loss is recognised in
profit or loss. This amendment will have no impact on the Company.
IAS 38 (amendment), ‘Intangible assets’. The amendment is part of the
IASB’s annual improvements project published in April 2009 and the
Company will apply IAS 38 (amendment) from the date IFRS 3 (revised)
is adopted. The amendment clarifies guidance in measuring the fair
value of an intangible asset acquired in a business combination and it
permits the grouping of intangible assets as a single asset if each asset
has a similar useful economic life. The amendment will not result in a
material impact on the Company’s financial statements.
IAS 32 (amendment), ‘Financial instruments: presentation - classification
of rights issue’, is effective from annual periods beginning on or after
1st February 2010 and amended the definition of a financial liability in
order to classify rights issues (and certain options or warrants) as equity
instruments in cases where such rights are given pro-rata to all of the
existing owners of the same class of an entity’s non-derivative equity
instruments, or to acquire a fixed number of the entity’s own equity
instruments for a fixed amount in any currency. This amendment will
have no impact on the Company after initial application.
IFRS 2, Share-based Payment: Group Cash-settled Share-based
Payment Transactions effective 1st January 2010. The IASB issued an
amendment to IFRS2 that clarified the scope and the accounting for
Group cash-settled share-based payment transactions. The Company
adopted this amendment as of 1st January 2010. It did not have an
impact on the financial position or performance of the Company.
IAS 39 Financial Instruments: Recognition and Measurement – Eligible
hedged Items effective 1st July 2009. The amendment clarifies that
an entity is permitted to designate a portion of the fair value changes
or cash flows variability of a financial instrument as a hedged item.
This also covers the designation of inflation as a hedged risk or
portion in particular situations. The Company has concluded that
the amendment will have no impact on the financial position or
performance of the Company, as the Company has not entered into
such hedges.
The following new standards, amendments to standards and
interpretations are mandatory for the first time for the financial year
beginning 1st May 2010, but are not currently relevant for the Company:
IFRIC 17, ‘Distributions of non-cash assets to owners’, effective for annual
periods beginning on or after 1st July 2009. This is not currently applicable
to the Company, as it has not made any non-cash distributions.
IFRIC 18, ‘Transfers of assets from customers’, effective for transfers of
assets received on or after 1st July 2009. This is not relevant to the
Company, as it has not received any assets from customers.
Standards, interpretations and amendments to published standards
that are not yet effective
The following new standards, amendments to standards and
interpretations have been issued, but are not effective for the financial
year beginning 1st July 2010 and have not been early adopted:
IAS 24 (Amendment), ‘Related party transactions’. The amended
standard is effective for annual periods beginning on or after 1st
January 2011. It clarified definition of a related party to simplify the
identification of such relationships and to eliminate inconsistencies in
its application. The revised standard introduces a partial exemption of
disclosure requirements for government-related entities. The Company
does not expect any impact on its financial position or performance.
IFRIC 14 (Amendment), ‘Prepayments of a minimum funding
requirement’. The amendment to IFRIC 14 is effective for annual
periods beginning on or after 1st January 2011 with retrospective
application. The amendment provides guidance on assessing the
recoverable amount of a net pension asset. The amendment permits
an entity to treat the prepayment of a minimum funding requirement
as an asset. The amendment is deemed to have no impact on the
financial statements of the Company.
IFRS 9, ‘Financial instruments: classification and measurement’, as
issued reflects the first phase of the IASB work on the replacement
of IAS 39 and applies to classification and measurement of financial
assets as defined in IAS 39. The standard is effective for annual periods
beginning on or after 1st January 2013. In subsequent phases, the
IASB will address classification and measurement of financial liabilities,
hedge accounting and derecognition. The completion of this project
is expected in early 2011. The adoption of the first phase of IFRS 9
might have an effect on the classification and measurement of the
Company’s assets. At this juncture it is difficult for the Company to
comprehend the impact on its financial position and performance.
IFRS 7, ‘Financial instruments: disclosures (amendment), is effective for
annual periods beginning on or after 1st July 2011. The amendments
36
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Annual Report and Accounts 2010/2011
requires additional quantitative and qualitative disclosures relating to
transfers of financial assets, where financial assets are derecognised in their
entirety, but where the entity has a continuing involvement in them and
where financial assets are not derecognised in their entirety. The adoption
of this will have no effect on the financial statements of the Company.
IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’, is
effective for annual periods beginning on or after 1st July 2010. The
interpretation clarifies that equity instruments issued to a creditor to
extinguish a financial liability qualify as consideration paid. The equity
instruments issued are measured at their fair value. In case that this
cannot be reliably measured, the instruments are measured at the fair
value of the liability extinguished. Any gain or loss is recognised in
profit or loss. The adoption of this interpretation will have no effect on
the financial statements of the Company.
IAS 12, ‘Income taxes (amendment) - Deferred taxes: recovery of
underlying assets’, is effective for annual periods beginning on or
after 1st January 2012. It introduces a rebuttable presumption that
deferred tax on investment properties measured at fair value will be
derecognised on a sale basis, unless an entity has a business model
that would indicate the investment property will be consumed in
the business. If consumed a use basis would need to be adopted.
The amendments also introduce the requirement that deferred tax
on non-depreciable assets measured using the revaluation model in
IAS16 should always be measured on a sale basis. The adoption of this
interpretation will have no effect on the financial statements of the
Company.
IFRS 10 Consolidated Financial Statements is effective from 1st January
2013. It introduces a new control model which applies to all entities,
including those that were previously considered ‘special purpose
entities’. Understanding the purpose and design of an investee is
critical to the assessment of control. The adoption of this will have no
effect on the financial statements of the Company.
IFRS 11 Joint Arrangements is effective from 1st January 2013. The
core principle of the standard is that a party to a joint arrangement
determines type of joint arrangements in which it is involved by
assessing the rights and obligations and accounts for those rights and
obligations in accordance with the type of joint arrangement. Joint
ventures now must be accounted for using the equity method. Joint
operator which is a newly defined term recognises its assets, liabilities,
revenues and expenses and relative shares thereof. The adoption of this
will have no effect on the financial statements of the Company.
IFRS 12 Disclosures of Interests with Other Entities is effective from 1st
January 2013. It requires increased disclosure about the nature, risks
and financial effects of an entity’s relationship with other entities along
with its involvement with other entities. The adoption of this will have
no effect on the financial statements of the Company.
IFRS 13, ‘Fair Value Measurement’ is effective from 1st January 2013. It
defines fair value, sets out in a single IFRS a framework for measuring
fair value and requires disclosures about fair value measurements. It
includes a three-level fair value hierarchy which priorities the inputs in
a fair value measurement. The adoption of this will have no effect on
the financial statements of the Company.
IFRS 10, ‘Consolidated Financial Statements’, IFRS 11 Joint
Arrangements, IFRS 12 Disclosures of Interests with Other Entities along
with related amendments to IAS 27 Separate Financial Statements
and IAS 28 Investments in Associates and Joint Ventures will have an
effective date of 1st January 2013. Early adoption of these standards is
permitted, but only if all five are early adopted together.
Improvements to IFRS (issued in May 2010). The IASB issued
improvement to IFRSs, an omnibus of amendments to its IFRS
standards. The amendments have not been adopted as they become
effective for annual periods on or after 1st January 2011 or 1st July
2010. The amendments listed below, are considered to have a
reasonable possible impact on the Company:
IFRS 3 Business combinations
IFRS 7 Financial instruments: disclosures
IAS 1 Presentation of financial statements
IAS 27 Consolidated and separate financial statements
IFRIC 13 Customer loyalty programmes
IAS 34 Interim Financial Reporting
The Company expects no impact from the adoption of the above
amendments on its financial position or performance.
Basis of consolidation
In the period ended 2009 the Company acquired via a share for share
exchange the entire issued share capital of dotMailer Limited, whose
principle activity is that of web and email based marketing.
Under IFRS 3 ‘Business combinations’ the dotMailer 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,
dotMailer Limited. The following accounting treatment has been
applied in respect of the reverse acquisition:
• The assets and liabilities of the legal subsidiary, dotMailer 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 dotMailer Limited to 30th 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 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 based upon the consolidated financial
statements of the legal subsidiary, dotMailer Limited for the year
ended 30th June 2009 apart from the equity structure which
reflects that of the parent.
• The following accounting treatment has been applied in respect of
the acquisition of dotDigital Plc:
• The assets and liabilities of dotDigital 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 then the fair value of the
net assets of the subsidiary acquired, the difference is recognised
directly in the income statement.
Annual Report and Accounts 2010/2011 37
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
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.
As a result of applying reverse acquisition accounting in the prior
period, the consolidated IFRS financial information of dotDigital Group
Plc is a continuation of the financial information of dotMailer Limited.
Revenue recognition
Revenue comprises of the fair value of the consideration received or
receivable for the sale of goods and 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 it’s estimates on historical
results, taking in to consideration the type of customer, the type of
transaction and the specifics of each arrangement.
The Group sells web based marketing services to other businesses and
services are either provided on a usage basis or fixed price bespoke
contract. Revenue from contracts are 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.
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.
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.
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 4-5 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 CGU.
• 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 viable technically
product, the related expenditure is separable, 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, this expense is
taken to the income statement and useful lives are reviewed on an
annual basis. Amortisation is provided at the following annual rates’
commencing from the date the asset is developed to a stage at
which the Company can receive economic benefits from the asset.
Property, plant and equipment
Tangible non current assets are stated at historical cost less
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 are 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.
Short leasehold:
Fixtures and fittings:
Computer equipment:
25% on cost
25% on cost
25% on cost
The asset’s residual values and useful economic lives are reviewed and
adjusted, if appropriate, at each balance sheet date. An asset’s carrying
amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater then 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. When revalued assets are sold, the amounts
included in other reserves are transferred to retained earnings.
Borrowings
Borrowings are recognised at their fair value net of transaction costs
incurred. They are classified as current liabilities unless the Group has
an unconditional right to defer the settlement of the liability of at least
12 months after the balance sheet date.
Borrowing costs are recognised in the income statement in the period
in which they are incurred.
Capital risk management
The Group manages it’s 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 and cash equivalents, short term finance
and equity attributable to the owners of the parent as disclosed in the
Statement of Changes in Equity.
38
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Annual Report and Accounts 2010/2011
Taxation
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 they related deferred income asset is realised
or deferred income tax liability is settled.
Research and development
Research expenditure is recognised as an expense when incurred.
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 of 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;
•
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.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset in
a subsequent period. 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 its useful life.
Foreign currency translation
Assets and liabilities in foreign currencies are translated into sterling at
the rates of exchange ruling at the balance sheet date. Transactions in
foreign currencies are translated into sterling at the rate of exchange
ruling at the date of transaction. Exchange differences are taken into
account in arriving at the operating result.
Operating leases
Leases in terms of which the Group assumes substantially all the
risks and rewards of ownership are classified as finance leases. Upon
initial recognition the leased asset is measured at an amount equal
to the lower of its fair value and present value of the minimum lease
payments. Subsequent to initial recognition, the asset is accounted for
in accordance the accounting policy applicable to that asset.
Other leases are operating leases and are not recognised in the Group’s
statement of financial position on a straight line basis over the term of
the lease. Lease incentives received are recognised as an integral part
of the total expense, over the term of the lease.
Use of estimates and judgments
The Group makes judgments, estimates and assumptions that effect
the application of policies and reported amounts of assets and
liabilities, income and expenses. The resulting accounting estimates
calculated using these judgments and assumptions will, by definition,
seldom equal the related actual results but are based on historical
experience and expectations of future events. The estimates and
underlying assumptions are reviewed on a ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision effects only that period, or in the
period of revision and future periods if the revision affects both current
and future periods.
The estimates and assumptions which have a significant risk of causing
a material adjustment to the carrying amount of assets and liabilities
are discussed below:
•
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.
Recoverable amount is the higher of fair value less costs to sell and
value in use. 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 for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an
expense immediately, unless the relevant asset is carried at a
re-valued amount, in which case the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised as income
immediately, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
• Plant and equipment, intangible assets and impairment of
goodwill
Intangible assets excluding goodwill and plant and equipment
are amortised or depreciated over their useful lives. Useful lives are
based on management’s estimates of the period that the assets will
generate revenue, which are periodically reviewed for continued
appropriateness. Changes to the estimates used can result in
significant variations in the carrying value.
The Group assesses the impairment of plant and equipment and
intangible assets subject to amortisation or depreciation whenever
events or changes in circumstances indicate that the carrying value
may not be recoverable.
Annual Report and Accounts 2010/2011 39
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
2. ACCOUNTING pOLICIES CONTINUED
Additionally, goodwill arising on acquisitions is subject to
impairment review. The Group’s management undertakes an
impairment review of goodwill annually or more frequently if
events or changes in circumstances indicate that the carrying value
may not be recoverable.
The complexity of the estimation process and issues related to the
assumptions, risks and uncertainties inherent in the application
of the Group’s accounting estimates in relation to plant and
equipment and intangible assets affect the amounts reported in the
financial statements, especially the estimates of the expected useful
economic lives and the carrying values of those assets. If business
conditions were different, or if different assumptions were used in
the application of this and other accounting estimates, it is likely
that materially different amounts could be reported in the Group’s
financial statements.
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 flows forecasts
which have been discounted at 5%. 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. At the period end, based on these assumptions there was
no indication of impairment of the value of goodwill.
however, if the projected sales do not materialise there is a risk that
the value of the intangible assets shown above would be impaired.
• Share-based compensation
The fair value of options and warrants are determined by reference
to the fair value of the options granted, excluding the impact of
any non-market vesting conditions (for example, profitability and
sales growth targets). Non-market vesting conditions are included
in assumptions about the number of options that are expected to
vest. At each balance sheet date, the entity revises its estimates of
the number of options that are expected to vest. It recognises the
impact of the revision to original estimates if any, in the income
statement, with corresponding adjustment to equity.
• Contingent considerations
The future consideration payable to the vendors of Netcallidus in
respect to the contingent consideration (earnouts) is based on the
Directors’ best estimate of future obligations which are dependent
on the future anticipated profits after tax. It is assumed that the
operating company improves profits in line with the Directors’
estimates. When earnouts are to be settled by both cash and equity
consideration, the fair value of the consideration is obtained by
discounting the amounts expected to be payable in the future
to their present value. Reviews of the fair values are undertaken
at each period end with any resulting adjustments being made
through the Groups income statement.
Contingent consideration
Contingent consideration is measured at fair value at the time of the
acquisition. If the amount of the contingent consideration changes as
a result of a post acquisition event (such as meeting profit targets) the
accounting for the change in consideration depends on whether the
additional consideration is in cash or equity. If it is in equity the original
amount is not recalculated but if the change is in cash or other assets
the change is recorded in the income statement.
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.
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 IFRS3
‘Business combinations’.
Other reserves relate to the charge for share based payments in
accordance with IFRS2 ‘Share Based Payments’.
Share based payments
For equity settled share based payment transactions the Group, in
accordance with IFRS 2 “Share Based Payments” measuring 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 are expected
to vest and the fair value of those financial instruments at the date
of grant. If the equity instruments granted vested immediately, the
expense is recognised in full.
The assumptions on the expected life of share options, volatility of
shares and risk free yield to maturity and expected dividend yield
on shares are used in the fair value calculation of the share options
outstanding at the year end (see note 25).
Trade payables
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. Terms
on accounts payables range from 10 to 90 days.
Functional currency translation
• Functional and presentation currency
Items included in the financial statements if 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 this currency the financial
statements are presented in.
• Transaction and balances
Foreign currency transactions are translated in to the presentation
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
A business segment is a group of assets and operations engaged in
providing products or services that are subject to risks and returns that are
different from those of other business segments. A geographical segment
is engaged in providing products or services within a particular economic
environment that are subject to risks and returns that are different from
those of segments operating in other economic environment.
40
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Annual Report and Accounts 2010/2011
3. SEGmENTAL REpORTING
The Groups’ primary reporting format is business segments and its second format is geographical segments. The Group only operates in a single
business and geographical segment. The Group’s single line of business is the provision of web based marketing services, whilst the geographical
segment in which it operates is currently restricted to the UK. Accordingly no segmental information for business segment or geographical
segment is required.
4. EmpLOYEES AND DIRECTORS
Wages and salaries
Social security costs
Other pension costs
The average monthly number of employees during the year was as follows:
Directors
Sales
Web designers and developers
Administration
5. NET FINANCE INCOmE
Finance income:
Exceptional item (see note 13)
Deposit account interest
Finance costs:
Loan
Interest payable
NET FINANCE INCOmE
30.6.11
£
3,437,503
393,270
36,178
30.6.10
£
2,639,741
270,902
23,111
3,866,951
2,933,754
30.6.11
30.6.10
6
27
88
12
133
30.6.11
£
1,122,828
5,034
1,127,862
1,125
343
1,468
1,126,394
6
21
31
16
74
30.6.10
£
-
3,088
3,088
1,607
-
1,607
1,481
The exceptional item outline above under finance income relates to the revision of the contingent consideration due in relation to the acquisition
of Netcallidus Limited in the previous reporting period. IFRS 3 relating to business combinations directs that any revaluations to the consideration
should be credited to the income statement as financial income. See note 13 for further details.
6. pROFIT bEFORE INCOmE TAx
COSTS bY NATURE
Profit from continuing operations has been arrived at after charging/(crediting):-
Staff related costs (inc Directors emoluments)
Operating leases: Land and buildings
Operating leases: Other
Audit remuneration
Amortisation of intangibles
Depreciation charge
Legal, professional and consultancy fees
Outsourcing costs
Computer expenditure
Research costs
Marketing costs
Bad debts
Foreign exchange (gains)/losses
Travelling
Office running
Other costs
TOTAL ADmINISTRATION ExpENSES
30.6.11
£
4,020,736
321,463
42,795
59,878
225,697
95,621
381,275
235,629
244,502
-
355,427
142,268
(18,035)
131,037
109,978
299,222
30.6.10
£
3,084,799
227,285
19,726
24,505
106,318
66,634
284,544
-
200,086
12,822
239,835
55,140
2,591
48,309
80,602
185,132
6,647,493
4,638,328
Annual Report and Accounts 2010/2011 41
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
6. pROFIT bEFORE INCOmE TAx- CONTINUED
AUDIT REmUNERATION
During the year period the Group obtained the following services from the Group’s auditor at costs detailed below:
Fees payable to the Group’s auditor for the audit of annual accounts
Under provision of fees paid to Group’s auditor in relation
to the audit of the previous period’s annual accounts
Non audit related fees: All other services
7.
INCOmE TAx
ANALYSIS OF THE TAx CHARGE
Current tax:
Tax
TOTAL TAx CHARGE IN INCOmE STATEmENT
30.6.11
£
35,000
18,000
6,787
59,787
30.6.10
£
24,506
-
-
24,506
30.6.11
£
30.6.10
£
273,743
273,743
233,104
233,104
FACTORS AFFECTING THE TAx CHARGE
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:
Profit on ordinary activities before tax
Profit on ordinary activities
multiplied by the standard rate of corporation tax
in the UK of 28% (2010 - 28%)
Effects of:
Expenses not deductible
Research and development enhanced claim
Effect of profits within marginal rate
Expenditure permitted on exercising options
Capital allowances in excess of depreciation
TOTAL INCOmE TAx
30.6.11
£
30.6.10
£
3,311,563
1,377,254
927,238
385,631
(205,576)
(291,397)
(9,314)
(136,184)
(11,024)
273,743
24,036
(165,365)
-
-
(11,198)
233,104
8. pROFIT/(LOSS) 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 for the financial year was £827,265 (2010 – loss £180,477).
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9. 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.
Reconciliations are as follows:-
bASIC EpS
Net income attributable to owners of the Parent
Adjusted EPS
Effect of exceptional items:
- Cost relating to listing on AIM
-
Revisions to financial instrument (see note 13)
ADjUSTED EARNINGS
Effect of dilutive shares
Options & Warrants
DILUTED EpS
Adjusted earnings
Basic EPS
Earnings attributable to Ordinary Shareholders
Adjusted EPS
ADjUSTED EARNINGS
Effect of dilutive shares
Options & Warrants
DILUTED EpS
Adjusted earnings
30.6.11
Weighted
average
number of
shares
Earnings
£
Per share
amount
pence
3,037,820
261,891,138
1.16
119,862
(1,122,828)
-
-
2,034,854
261,891,138
-
22,268,222
-
-
0.78
-
2,034,854
284,159,360
0.72
30.6.10
Weighted
average
number of
shares
Earnings
£
1,144,150
-
258,500,000
-
1,144,150
258,500,000
-
17,886,690
Per share
amount
pence
0.44
-
0.44
-
1,144,150 276,386,690
0.41
Earnings per share for this reporting period and respective comparatives have been presented post the share consolidation made reference to in
note 16. had the consolidation not taken place the EPS for the reporting period would be the following:
Basic:
Diluted:
0.14p (2010 – 0.09)
0.13p (2010 – 0.08)
Annual Report and Accounts 2010/2011 43
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
10. GOODWILL
GROUp
COST
At 1st July 2010
and 30th June 2011
NET bOOk VALUE
AT 30TH jUNE 2011
COST
At 1st July 2009
Additions
At 30th June 2010
NET bOOk VALUE
AT 30TH jUNE 2010
GROUp
£
4,120,561
4,120,561
£
608,503
3,512,058
4,120,561
4,120,561
Impairment test for goodwill
Goodwill is allocated to the Group’s single cash generating units identified, that being dotMailer Limited and Netcallidus Limited.
dotMailer Limited
The recoverable amount of a cash generating unit is determined based on value in use calculations. These calculations use pre tax cash flow
projections based on financial budgets approved by management covering the five year period to 30th June 2016.
The key assumptions use to prepare the financial budgets are as follows:
Revenue growth rates:
Pre tax discount rate:
Income tax rate:
2012
2013
2014
2015
2016
40.00%
36.00%
30.00%
30.00%
30.00%
All years
6.94%
All years
28.00%
The key assumptions used to prepare the financial budgets are based on a combination of historical experience and current industry knowledge
and trends.
Netcallidus Limited
Revenue growth rates:
Pre tax discount rate:
Income tax rate:
2012
2013
2014
2015
2016
90.00%
85.00%
30.00%
30.00%
30.00%
All years
6.94%
All years
28.00%
The key assumptions used to prepare the financial budgets are based on a combination of historical experience and current industry knowledge
and trends.
The cash flow forecasts used in the value in use calculations have not been extended beyond the five year period covered by management’s
financial budgets.
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11. INTANGIbLE ASSETS
GROUp
COST
At 1st July 2010
Additions
AT 30TH jUNE 2011
AmORTISATION
At 1st July 2010
Amortisation for year
AT 30TH jUNE 2011
NET bOOk VALUE
AT 30TH jUNE 2011
COST
At 1st July 2009
Additions
AT 30TH jUNE 2010
AmORTISATION
At 1st July 2009
Amortisation for year
AT 30TH jUNE 2010
NET bOOk VALUE
AT 30TH jUNE 2010
Computer
software
£
Development
costs
£
125,301
22,654
579,540
630,383
Domain
names
£
8,836
4,135
Totals
£
713,677
657,172
147,955
1,209,923
12,971
1,370,849
32,825
32,355
65,180
117,280
190,435
307,715
4,490
2,907
7,397
154,595
225,697
380,292
82,775
902,208
5,574
990,557
Computer
software
£
Development
costs
£
57,056
68,245
125,301
12,407
20,418
32,825
242,060
337,480
579,540
33,624
83,656
117,280
Domain
names
£
8,836
-
8,836
2,246
2,244
4,490
Totals
£
307,952
405,725
713,677
48,277
106,318
154,595
92,476
462,260
4,346
559,082
Development cost additions represents resources the Group have invested in the development of unique computer programming with the
intention of re sale once complete.
12. pROpERTY, pLANT AND EQUIpmENT
GROUp
COST
At 1st July 2010
Additions
AT 30TH jUNE 2011
DEpRECIATION
At 1st July 2010
Charge for year
AT 30TH jUNE 2011
NET bOOk VALUE
AT 30TH jUNE 2011
Short
leasehold
£
Plant and
machinery
£
11,875
-
11,875
9,100
1,026
10,126
5,577
2,959
8,536
1,719
1,763
3,482
Fixtures
and
fittings
£
144,974
29,971
174,945
93,719
26,007
119,726
Computer
equipment
£
290,446
127,694
418,140
175,215
66,823
242,038
Totals
£
452,872
160,624
613,496
279,753
95,619
375,372
1,749
5,054
55,219
176,102
238,124
Annual Report and Accounts 2010/2011 45
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
12. pROpERTY, pLANT AND EQUIpmENT CONTINUED
COST
At 1st July 2009
Additions
AT 30TH jUNE 2010
DEpRECIATION
At 1st July 2009
Charge for year
AT 30TH jUNE 2010
NET bOOk VALUE
AT 30TH jUNE 2010
13. INVESTmENTS
COmpANY
COST
At 1st July 2010
and 30th June 2011
NET bOOk VALUE
AT 30TH jUNE 2011
At 30th June 2010
COST
At 1st July 2009
Additions
At 30th June 2010
NET bOOk VALUE
AT 30TH jUNE 2010
Short
leasehold
£
11,875
-
11,875
6,160
2,940
9,100
Plant and
machinery
£
-
5,577
5,577
-
1,719
1,719
Fixtures
and
fittings
£
120,990
23,984
144,974
67,455
26,264
93,719
Computer
equipment
£
198,874
91,572
290,446
139,072
36,143
175,215
Totals
£
331,739
121,133
452,872
212,687
67,066
279,753
2,775
3,859
51,255
115,231
173,120
Shares in
Group
undertakings
£
8,704,468
8,704,468
8,704,468
Shares in
Group
undertakings
£
5,183,488
3,520,980
8,704,468
8,704,468
The Group or the Company’s investments at the balance sheet date in the share capital of companies include the following:
SUbSIDIARIES
dotMailer Limited
Nature of business: Web and email based marketing
Class of shares:
Ordinary
Ordinary A
Aggregate capital and reserves
Profit for the year
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Annual Report and Accounts 2010/2011
Proportion of voting
power held %
100.00
100.00
30.6.10
£
3,645,246
1,285,966
30.6.11
£
4,872,520
2,008,026
dotAgency Limited
Nature of business: Dormant
Class of shares:
Ordinary
Aggregate capital and reserves
dotCommerce Limited
Nature of business: Dormant
Class of shares:
Ordinary
Aggregate capital and reserves
dotEditor
Nature of business: Dormant
Class of shares:
Ordinary
Aggregate capital and reserves
dotSEO
Nature of business: Dormant
Class of shares:
Ordinary
Aggregate capital and reserves
Netcallidus Limited
Nature of business: Internet and website services
Class of shares:
Ordinary B, C & D
Aggregate capital and reserves
Profit for the year
Proportion of voting
power held %
100.00
30.6.10
£
1,000
30.6.11
£
1,000
Proportion of voting
power held %
100.00
30.6.10
£
1,000
30.6.11
£
1,000
Proportion of voting
power held %
100.00
30.6.10
£
1,000
30.6.11
£
1,000
Proportion of voting
power held %
100.00
30.6.10
£
1,000
30.6.11
£
1,000
Proportion of voting
power held %
100.00
30.6.10
£
236,135
230,532
30.6.11
£
297,677
207,095
Annual Report and Accounts 2010/2011 47
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
13. INVESTmENTS CONTINUED
Below are the Parent Company’s indirect holdings:
INDIRECT HOLDING
Netcallidus Europe Limited
Country of incorporation: England and Wales
Nature of business: Branch company
Class of shares:
Ordinary
Aggregate capital and reserves
Loss for the year
Proportion of voting
power held %
100.00
30.6.11
£
(3,566)
(4,566)
On 17th May 2010 the Group acquired the entire share capital of Netcallidus Limited a company registered in England and Wales for an initial
consideration of £1,152,660 and an additional contingent consideration of £2,366,320 totalling £3,518,980. The Group’s principle activity is the
provision of internet and website services. Obtaining control of Netcallidus Limited allows the Group to incorporate the customer base in to its
own while providing additional expertise to further develop and market it’s SEO products.
For the 6 weeks Netcallidus Limited has been incorporated in to the results of the previous reporting period the Company contributed £110,012 to
the Groups reported revenues and had the acquisition occurred on 1st July 2009, management estimates that the contribution to revenue would
have been £671,594 with the associated post tax profit being £216,924. In determining these amounts, management has assumed that the fair
value adjustments, determined provisionally, that arose on the date of he acquisition would have been the same if the acquisition had occurred
on 1st July 2009.
The following summarises the major classes of consideration transferred and the recognised amounts of assets and liabilities assumed at the
acquisition date:
Consideration transferred:
Cash
Equity instruments (14,200,930 shares)
Discounted
fair value
£
1,000,000
152,660
1,152,660
The number of shares to be issued in respect of the consideration transferred is based on the expected list price of 1.075p per share which is the
mid market price at the year end. The number of shares to be issued as contingent consideration is based on the expected present value of the
Groups share price.
Identifiable assets acquired and liabilities assumed:
Goodwill
Property, plant and equipment
Trade and other receivables
Deposits, cash and cash equivalents
Taxation
Trade and other payables
NET ASSETS
Goodwill:
Purchase consideration:
Fair value of net assets acquired
Goodwill acquired
Goodwill acquired from purchase of subsidiary
Book and Fair
Value
£
45,000
2,532
88,349
41,407
(84,598)
(40,768)
51,922
£
3,518,980
51,922
3,467,058
45,000
3,512,058
The acquisition related costs related to external legal fees and due diligence totalling £66,163 have been included in administrative expenses in
the consolidated statement of comprehensive income for the previous reporting period.
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The contingent consideration arrangement requires the Group to pay the former owners of Netcallidus Limited additional consideration of
£1,243,492 (2010- £2,366,320) in a combination of cash and equity in the Group. As made reference to in the previous year’s financial statements
an interim payment was due to be made on finalising the profit after tax figures based on 4 times the profit after tax in the year ended 30th June
2011 less any amounts that have been paid previously, but the level of the profit after tax generated against the Boards expectations indicated
that no additional payment was due and led to a revision of the expected payment due based in the profits generated in the year ended 30th
June 2012. IFRS 3 regarding business combinations requires all revisions to the expected payments due on acquisition to be charged to the
income statement as finance income therefore £1,122,828 has been charged.
The final payment will be based on 3 times the profit after tax in the year ended 30th June 2012 less any amounts paid previously. The
management’s estimates are based on the business plan prepared by the Directors of Netcallidus and reviewed by the Directors of dotDigital.
An interim payment will be made on finalising the profit after tax figures based on 4 times the profit after tax in the year ended 30th June 2011
less any amounts that have been paid previously.
The Board have assessed a range of outcomes of the future profit for the years 2011 and 2012. Based on this analysis the Board have arrived
at an estimated future deferred consideration as shown below.
The consideration will be paid on a 40% cash and 60% equity combination. The shares will be issued at the mid-market price quoted on the
AIM market on the date of the sign off by the Board of Netcallidus’s financial statements.
The Board estimate the split of the payment to be as follows:
Less than one year
14. TRADE AND OTHER RECEIVAbLES
Current:
Trade receivables
Other receivables
VAT
Prepayments and accrued income
15. CASH AND CASH EQUIVALENTS
Cash in hand
Bank accounts
16. CALLED Up SHARE CApITAL
Allotted, issued and fully paid
274,972,065
(2010 – 1,292,500,000 at £0.001 per share)
Nominal value
Discounted fair value
Cash
£
523,576
523,576
Shares
£
785,363
785,363
Cash
£
497,397
497,397
Shares
£
Total
£
746,095
1,243,492
746,095
1,243,492
Group
30.6.11
£
30.6.10
£
Company
30.6.11
£
1,452,776
34,630
-
170,638
1,108,231
10,986
-
115,428
1,658,044
1,234,645
-
-
11,739
14,007
25,746
30.6.10
£
-
-
-
4,826
4,826
Group
Company
30.6.11
£
394
2,567,871
30.6.10
£
124
1,277,493
2,568,265
1,277,617
30.6.11
£
-
235,274
235,274
30.6.10
£
-
385,332
385,332
Class
Number
Ordinary
Nominal
value
£0.005
30.6.11
£
30.6.10
£
1,374,861
1,292,500
1,374,861
1,292,500
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings
of the Company.
During the reporting period the Company undertook the following transactions involving the issuing and reclassifying issued share capital:
25,000,000 shares were issued at par. On 29th June 2011 41,666,667 shares were issued at a premium price of 1.2p per share and 800,000 shares
were issued at a premium price of 1p per share.*
Annual Report and Accounts 2010/2011 49
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
16. CALLED Up SHARE CApITAL CONTINUED
On 28th October 2010 the Board of Directors were satisfied that all conditions to the purchase of Netcallidus Limited (see note 13) were
complete, therefore the final stage of the consideration due to the previous owners, partly being the issue of 14,894,000 ordinary shares
at a premium value of 0 .0125p was resolved. This issue of shares had been provided for in the previous reporting period and therefore a
reclassification of equity, see report in changes in equity on page 33.
On 10th February 2011 the Board of Directors passed a resolution to consolidate the issued share capital at rate of 5 Ordinary Shares to 1 and at
the same time increasing the nominal value of each share to 0.5p from 0.1p per Ordinary Share.
* All issues of Ordinary Shares were undertaken before the share consolidation was passed by the Board and are therefore quoted at the nominal
values at the beginning of the reporting period.
17. RESERVES
GROUp
At 1st July 2010
Cash share issue
Cash share issue
Reclassification of equity
AT 30TH jUNE 2011
GROUp
At 1st July 2010
Profit for the year
Cash share issue
Share based payment
Reclassification of equity
AT 30TH jUNE 2011
COmpANY
At 1st July 2010
Profit for the year
Cash share issue
Share based payment
Reclassification of equity
AT 30TH jUNE 2011
18. TRADE AND OTHER pAYAbLES
Current:
Trade payables
Amounts due to related parties (see note 23)
Social security and other taxes
Other payables
Accruals and deferred income
VAT
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Annual Report and Accounts 2010/2011
Retained
earnings
£
2,696,522
3,037,820
-
-
Share
premium
£
4,533,754
-
65,533
137,766
5,734,342
4,737,053
Unissued
share
capital
£
152,660
-
-
(152,660)
-
Reverse
acquisition
reserve
£
(4,695,465)
-
-
-
Other
reserves
£
29,493
-
40,667
-
Totals
£
2,716,964
3,037,820
65,533
40,667
(14,894)
(4,695,465)
70,160
5,846,090
Retained
earnings
£
(329,205)
827,265
-
-
-
Share
premium
£
4,533,754
65,533
-
137,766
Unissued
share
capital
£
152,660
-
-
(152,660)
Other
reserves
£
29,493
-
40,667
-
Totals
£
4,386,702
827,265
65,533
40,667
(14,894)
498,060
4,737,053
-
70,160
5,305,273
Group
30.6.11
£
30.6.10
£
Company
30.6.11
£
204,894
-
272,669
33,404
183,042
313,734
133,764
-
172,089
18,483
112,444
231,984
71,516
926,596
-
-
43,750
-
30.6.10
£
52,527
984,076
-
2,000
8,333
2,168
1,007,743
668,764
1,041,862
1,049,104
19. FINANCIAL LIAbILITIES - bORROWINGS
Current:
Bank loans
Non-current:
Bank loans - 1-2 years
Contingent consideration
30.6.11
£
6,076
6,076
Group
30.6.10
£
12,151
12,151
30.6.11
£
-
-
Company
30.6.10
£
-
-
-
1,243,492
6,319
2,366,320
-
1,243,492
-
2,366,320
1,243,492
2,372,639
1,243,492
2,366,320
Included in non current other financial liabilities is the present value of the contingent consideration due on the purchase of the entire share
capital of Netcallidus Limited. The above balance may become due in part of in full over the next 2 years dependent on the subsidiary’s ability
to meet or exceed predetermined profit targets. See note 13 for further information.
20. LEASING AGREEmENTS
Minimum lease payments under non cancellable operating leases fall due as follows:-
Within one year
Between two to five years
Within one year
Between two to five years
Land and Buildings
£
134,928
33,155
168,083
Land and Buildings
£
160,496
149,986
310,482
30.6.11
Others
£
39,774
27,928
67,702
30.6.10
Others
£
30,567
26,686
57,253
Total
£
174,702
61,083
235,785
Total
£
191,063
176,672
367,735
21. FINANCIAL INSTRUmENTS
The Group’s activities exposes it to a number of financial risks that include credit risk, liquidity risk and cash flow interest rate risk. These risks,
and the Group’s policies for managing them have been applied consistently throughout the year and are set out below:
The Group hold no financial or non other financial instruments other then those utilised in the working operations of the Group and that listed
in this note.
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 end of the reporting period the Group was not exposed to any movement in interest rates in regards to loans and
achieved less then 1% interest on cash holdings.
In the previous period the Group entered in to an agreement to purchase the entire share capital of Netcallidus Limited. The contingent
consideration arrangement requires the Group to pay the former owners of Netcallidus Limited an estimated consideration of £2,366,320
in a combination of cash and equity in the Group.
The final payment will be based on 3 times the profit after tax in the year ended 30th June 2012 less any amounts previously paid. The
management‘s estimates are based on the business plan prepared by the Directors of Netcallidus and reviewed by the Board of dotDigital.
The final payment due based on profits after tax as at 30th June 2011 has been paid.
The Board have assessed the range of outcomes of future profits for the years 2011 and 2012. Based on this analysis we have arrived at
an estimated future deferred consideration as shown in the table below:
The consideration paid was based on 40% cash and 60% equity combination. The shares issued at the mid-market price quoted on the public
markets on the date of the sign off by the Board of Netcallidus’ financial statements. the notional and fair value of the expected payments to
the former owners are outlined below in their composite elements.
Annual Report and Accounts 2010/2011 51
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
21. FINANCIAL INSTRUmENTS CONTINUED
Year ended 30th June 2011:
Less than one year
Cash
£
523,576
523,576
Nominal value
Shares
£
785,363
785,363
Cash
£
497,397
497,397
Discounted fair value
Shares
£
Total
£
746,095
1,243,492
746,095
1,243,492
The term “shares” indicates the value of ordinary share capital to be issued should targets be met and discount factors not change. Any changes
resulting in revaluations of the consideration due in following reporting periods will be charged to the income statement.
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 Groups 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.
As described above the Group entered in to an agreement to purchase the entire share capital of Netcallidus Limited. The contingent deferred
consideration arrangement requires the Group to pay the former owners of Netcallidus Limited further payments of cash and shares in October 2012.
The final payment in October 2012 will be based on 3 times the profit after tax in the year ended 30th June 2012 less any amounts previously paid.
The management estimates of deferred consideration are based on a range of scenarios prepared by the Directors of Netcallidus and reviewed
by the Board of dotDigital.
An interim payment was made in October 2011.
The two tranches of deferred consideration were and will be paid in the ratio of 40% cash and 60% equity. The shares will be issued at the mid-
market price quoted on public markets on the date of the sign off by the Board of Netcallidus’ financial statements.
In arriving at and negotiating the structure of the acquisition the Board were mindful of the need to ensure the proposed deferred consideration
did not create a liquidity risk for the Group. The structure of the deferred consideration element is such that under all the scenarios which could
be envisaged the cash flows generated by the profit stream of the Netcallidus business will be sufficient to fund the cash element of the deferred
consideration.
Credit risk
Credit risk arises principally from the Group’s trade receivables which comprise amounts due from customers. Prior to accepting new customers a
credit check is obtained. As at 30th June 2011 there were no significant debts past their due period which had not been provided for. The maturity
of the Groups trade receivables is as follows:
0-30 days
30-60 days
More than 60 days
As at
30.06.11
£
1,030,966
268,425
188,475
As at
30.06.10
£
747,730
251,565
108,936
1,487,866
1,108,231
The Group minimises its credit risk by profiling all new customers and monitoring existing client of the Group for changes in their initial profile.
The level of trade receivables past the average collection period consisted of a value of £188,475 of which £142,286 was provided for.
The Group felt that the remainder would be collected post June as they were clients with long standing relationships. 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 ratings.
Details as to maximum fair values of the Group’s financial assets and liabilities can be found in the consolidated statement of financial position.
Capital Policy
The Groups objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide optimal returns
for shareholders and to maintain an efficient capital structure to reduce the cost of capital.
In doing so the Group’s strategy is to maintain a capital structure commensurate with a strong credit rating and to retain appropriate levels of
liquidity headroom to ensure financial stability and flexibility. To achieve this, the Group monitors key credit metrics, risk and fixed charge cover
to maintain this position. In addition the Group ensures a combination of appropriate short-term and long-term liquidity headroom.
52
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Annual Report and Accounts 2010/2011
During the year the Group had a short-term loan balance of £6,072 (2010- £12,152) and amounts payable over one year are 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 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.
22. CApITAL COmmITmENTS
The Company and Group have no capital commitments as at the year end.
23. RELATED pARTY DISCLOSURES
GROUp
The following transactions were carried out with related parties:
Sales of service
SALE OF SERVICES
Entities controlled by non-executive of the Group
Stockroom Limited - website services
Chillibean Limited - email marketing services
TOTAL
2011
£
-
-
-
Group
2010
£
4,795
4,395
9,190
Both the above companies were controlled by D Pacy who was a Non-Executive Director during the financial year.
Purchases of services
pURCHASES OF SERVICES
Entities controlled by non-executive of the Group
haggie Financial LLP- Financial PR
Nexus Financial Limited - Financial PR
hansard Communications Limited - Financial PR
TOTAL
2011
£
5,155
20,709
2,621
28,485
Group
2010
£
20,701
-
-
20,701
2011
£
-
-
-
2011
£
5,155
20,709
2,621
28,485
Company
2010
£
-
-
-
Company
2010
£
-
-
-
-
N Nelson a Non-Executive Director of the Group had interests in the above companies. These companies provided financial public relations
services to the Company.
Key Management compensation
Key management includes Directors, Associate Directors, Members of the Executive Committee and the Company Secretary. The compensation
paid for key management for employee services is shown below:
Remuneration and other short term employee benefits
Share-based payments
TOTAL
Directors & Non-Executive Directors
Aggregate emoluments
Aggregate gains made on the exercise of share options
Company contributions to money purchase pension scheme
TOTAL
2011
£
842,523
7,821
850,344
2011
£
778,988
483,333
34,013
1,296,334
Group
2010
£
582,244
4,680
586,924
Group
2010
£
531,902
-
30,974
562,876
2011
£
42,917
-
42,917
2011
£
42,917
-
-
42,917
Company
2010
£
38,333
-
38,333
Company
2010
£
38,333
-
-
38,333
The number of Directors for whom retirement benefits are accruing under the money purchased pension schemes amounted to 4 (2010 – 4).
Annual Report and Accounts 2010/2011 53
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
23. RELATED pARTY DISCLOSURES CONTINUED
Information regarding the highest paid Group Director for the year is as follows:
Salaries
Other benefits
Pension costs
TOTAL
Year-end balances arising from sales/purchases of services
RECEIVAbLES FROm RELATED pARTIES
Entities controlled by non-executive Directors of the Group:
Chillibean Limited
Stockroom Limited
pAYAbLES TO RELATED pARTIES
Entities controlled by non-executive Directors of the Group:
haggie Financial LLP
Nexus Financial Limited
hansard Communications Limited
Subsidiary
- dotMailer Limited
Loans to related parties
There were no loans made to related parties during the financial year.
2011
2010
163,500
131,000
757
10,458
174,715
757
9,500
141,257
Group
Company
2011
2010
2011
2010
-
-
4,796
586
-
-
2,261
-
-
-
-
-
-
-
-
-
2,261
-
-
-
-
-
926,596
984,076
24. ULTImATE CONTROLLING pARTY
There is no ultimate controlling party of the Group. dotDigital Group PLC acts as the parent Company to dotMailer Limited, Netcallidus Limited,
dotAgency Limited (Dormant), dotSEO Limited (Dormant), dotCommerce Limited (Dormant) & dotEditor Limited (Dormant). The Company also
indirectly controls Netcallidus Europe Limited.
25. SHARE-bASED pAYmENT TRANSACTIONS
The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted after 7th November 2002.
The expense is recognised for share based payments made during the year is £40,667 (2010- £24,191)
Also on 11th November 2010 the Board of Directors also granted 34,000,000 options to employees of the Group exercisable on or after 1st July
2010 until 1st February 2019. 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
Outstanding at the beginning of the period
Granted during the year
Forfeited/cancelled during the period
Exchanged for shares
Outstanding at the end of the period
Exercisable at the end of the period
30.6.11
30.6.10
No of options
18,785,333
6,800,000
370,000
13,493,333
11,722,000
Nil
WAEP
No of options
0.27p
1.00p
1.00p
0.42p
14,845,333
4,250,000
310,000
Nil
18,785,333
Nil
WAEP
0.27p
1.00p
1.00p
0.42p
54
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Annual Report and Accounts 2010/2011
The fair value of the options granted in the year have been calculated using the Black Scholes model assuming the inputs shown below:
Grant date
Number of options granted
Share price at grant date
Exercise price at grant date
Risk free rate
Option life
Expected volatility
Expected dividend yield
Fair value of option
11th November 2010
6,800,000
5.13p
5.13p
2.43%
4.5
7.83%
0%
0.25p
Number in options detailed above and the respective comparisons have been restated for the share consolidation undertaken, See note 16 for
further details.
26. GROUp RECONCILIATION OF pROFIT bEFORE INCOmE TAx TO CASH GENERATED FROm OpERATIONS
Profit before income tax
Depreciation charges
Share based payment
Finance costs
Finance income
Increase in trade and other receivables
Increase in trade and other payables
CASH GENERATED FROm OpERATIONS
27. GROUp CASH AND CASH EQUIVALENTS
30.6.11
£
3,311,563
321,318
40,667
1,468
(1,127,862)
30.6.10
£
1,377,254
170,338
24,191
1,607
(3,088)
2,547,154
1,570,302
(423,399)
338,979
(492,992)
198,628
2,462,734
1,275,938
The amounts disclosed on the statement of cash flow in respect of cash and cash equivalents are in respect of these statement of financial
position amounts:
YEAR ENDED 30TH jUNE 2011
Cash and cash equivalents
YEAR ENDED 30TH jUNE 2010
CASH AND CASH EQUIVALENTS
30.6.11
£
1.7.10
£
2,568,265
1,277,617
2,568,265
1,277,617
30.6.11
£
1.7.10
£
1,277,617
1,677,902
28. COmpANY RECONCILIATION OF pROFIT/(LOSS) bEFORE INCOmE TAx TO CASH GENERATED FROm OpERATIONS
Profit/(loss) before income tax
Share options
Finance income
Increase in trade and other receivables
Increase in trade and other payables
CASH GENERATED FROm OpERATIONS
30.6.11
£
827,265
40,667
(1,122,828)
30.6.10
£
(180,477)
24,191
-
(254,896)
(156,286)
(9,181)
6,488
(2,114)
18,763
(257,589)
(139,637)
Annual Report and Accounts 2010/2011 55
dotDigital Group Plc
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR ThE YEAR ENDED 30Th JUNE 2011
29. COmpANY CASH AND CASH EQUIVALENTS
The amounts disclosed on the statement of cash flow in respect of cash and cash equivalents are in respect of this statement of financial position
amounts:
YEAR ENDED 30TH jUNE 2011
Cash and cash equivalents
YEAR ENDED 30TH jUNE 2010
Cash and cash equivalents
30.6.11
£
1.7.10
£
235,274
385,332
30.6.11
£
1.7.10
£
385,332
564,531
30. RESEARCH & DEVELOpmENT
During the period the Group incurred nil (2010- £12,822) in research costs and £630,383 (2010- £337,480) in development investments.
All resources utilised in research and development has been categorised as outline in the accounting policy governing this area.
31. pOST bALANCE SHEET EVENTS
There are no post balance sheet events with an impact on the Group’s financial statements.
56
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Annual Report and Accounts 2010/2011
oUR VALUes
Professional,
expert and fun
Creative and
geeky with the
human touch
Approachable,
sociable,
welcoming and
client-centric
Fast-paced but
quality driven
Corporate
but cool
Business-like,
entrepreneurial
but still a family
oUR MIssIon
empowering clients to punch above their weight by providing
the world’s best digital marketing products.
CoMPAnY InFoRMAtIon
Directors
s Bird
n C P nelson
P A simmonds
I taylor
G Fidura
R Kellett-Clarke (appointed 13 June 2011)
F Beechinor-Collins (appointed 5 May 2011)
D Pacy (resigned 13 December 2010)
secretary
M Patel
registereD office
Finsgate
5-7 Cranwood street
London
eC1V 9ee
registereD number
06289659 (england and Wales)
auDitors
Jeffreys Henry LLP
Finsgate
5-7 Cranwood street
London
eC1V 9ee
solicitors
BPe solicitors LLP
st James House
st James square
Cheltenham
GL50 3PR
PrinciPal bankers
national Westminster Bank plc
Charing Cross, London Branch
Po Box 113
Cavell House
2a Charing Cross Road
London
WC2H 0PD
registrars
share Registrars Limited
suite e First Floor
9 Lion and Lamb Yard
Farnham
surrey
GU9 7LL
nomaD/broker
Zeus Capital
3 Ralli Courts
West Riverside
Manchester
M3 5Ft
Joint broker
Charles stanley
131 Finsbury Pavement
London
eC2A 1nt
Website
www.dotdigitalgroup.com
Contents
01
02
03
13
16
18
21
22
24
29
30
30
31
32
33
34
35
35
36
business summary
key HigHligHts anD financial overvieW
cHairman’s anD cHief eXecutive’s rePort
corPorate social resPonsibility rePort
our boarD of Directors
corPorate governance rePort
auDit committee rePort
remuneration committee rePort
rePort of tHe Directors’
inDePenDent auDitor’s rePort
consoliDateD income statement
consoliDateD statement of comPreHensive income
consoliDateD statement of financial Position
comPany statement of financial Position
consoliDateD statement of cHanges in equity
comPany statement of cHanges in equity
consoliDateD statement of casH floWs
comPany statement of casH floWs
notes to tHe consoliDateD financial statements
ibc comPany information
croydon
no. 1 croydon
12-16 addiscombe road
cr0 0Xt
t: 020 8662 2762
edinburgh
mWb business exchange
9-10 st andrews square
edinburgh
eH2 2af
t: 0131 718 6037
london bridge
6-8 emerson street
london
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northampton
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manchester
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t: 0161 618 1070
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www.dotdigitalgroup.com
2010/2011
AnnUAL RePoRt AnD ACCoUnts