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15 years of dotdigital
1999
2002
2006
• Ellipsis Media set up
as web design and
development agency
• Opened first office
• Launched dotmailer
as a standalone product
for the mass market
• Ground up re-write of
dotMailer v4 launched
and proved to be a game
changer for marketers,
and subsequently our
business
2009
• Won the National Business
Awards Growth Strategy
of the year
• Deloitte Fast 500
Tech Co’s in EMEA
• Integrated dotmailer
with Dynamics
• Launched Easy Editor,
SMS Mobile feature and
services department
• First employee share options
REVENUE £4.8m
EBITDA £1.1m
• Hired first employee
2000
• Developed sales people
and infrastructure
2003/05
• Built an email
broadcast tool for
the BBC as part
of a wide-ranging
digital project
2001
• Won award for Deloitte
Fast 500 Tech Co in EMEA
• Ellipsis changed name
to dotmailer
• Opened first London office
PLUS MARKET LISTED
SHARE PRICE 3.75p
MARKET CAP £10m
REVENUE £2.5m
EBITDA £0.8m
2008
2009
2013
2011
• Admission to AIM
• Launched social media management
• Translated the platform into eight
languages
• Won Croydon ‘best medium-sized
business’ award for the second
year running
REVENUE £9.0m
EBITDA £2.6m
• Integrated dotmailer with Magento
• Started accelerated investment
strategy
• Opened New York office
REVENUE £13.8m
EBITDA £4.1m
• Won the National Business
Awards Growth Strategy
of the year
• Deloitte Fast 500
Tech Co’s in EMEA
• Integrated dotmailer
with Dynamics
• Launched Easy Editor,
SMS Mobile feature and
services department
• First employee share options
REVENUE £4.8m
EBITDA £1.1m
• Deloitte Fast Track 500 Tech in EMEA
• Opened office in Manchester
Edinburgh and Belarus
• Integrated dotmailer with Saleslogix
• Won Croydon business awards
for ‘best medium-sized business’
• Opened first London office
• Annual sent volume reaches
a billion emails
REVENUE £6.0m
EBITDA £1.5m
2010
• Won award for Deloitte
Fast 500 Tech Co in EMEA
• Ellipsis changed name
to dotmailer
PLUS MARKET LISTED
SHARE PRICE 3.75p
MARKET CAP £10m
REVENUE £2.5m
EBITDA £0.8m
• Integrated dotmailer with
Salesforce
• Launched multiple automation
features including Segments,
Surveys and Triggers
• Won the ‘Ruban d’Honneur’
Awards at the European Business
Awards for ‘best mid-sized
business’
REVENUE £12.0m
EBITDA £3.4m
2012
I M A G I N AT I O N . . . D E L I V E R E D
• Rebranded company and
updated dotmailer interface
• Celebrated 15 years of business
by opening a new London
Bridge office
• 53 new staff join the business,
taking total number employed
to 179. Company’s first ever
employee is voted ‘employee
of the year’ by staff
AS OF 30/06/2014
SHARE PRICE 33.13p
MARKET CAP £94m
2014
Corporate statement
dotdigital group’s flagship product is dotmailer, the
UK’s number one email marketing automation platform.
We understand what marketers need from a technology
platform and bring together features and usability in a way
that no one else does. Supported by world-class strategic
and creative services we make it easy for our customers
to achieve dramatic results that grow their business.
Contents
1 Key highlights
2 Chairman’s statement
Strategic report
4 The dotmailer platform
6 Marketing automation the dotmailer way
7 Sustainable differentiation strategy
8 Our values
9 Our strategy
10 Our clients
12 Our people
14 Key performance indicators
16 Risks, mitigations and impact
18 Chief Executive’s report
26 Corporate social responsibility report
Governance
28 Board of Directors
30 Corporate governance report
31 Audit committee report
32 Remuneration committee report
34 Report of the Directors
Financial statements
36 Report of the independent auditors
38 Consolidated income statement
38 Consolidated statement of comprehensive income
39 Consolidated statement of financial position
40 Company statement of financial position
41 Consolidated statement of changes in equity
42 Company statement of changes in equity
43 Consolidated statement of cash flows
43 Company statement of cash flows
44 Notes to the consolidated financial statements
68 Company information
Key highlights
Revenues in SaaS products up 33%
(from £12.2m to £16.2m)
EBITDA increase by 13% to £4.7m
Net cash generated from operating
activities of £5.2m
Strong cash position of £9.3m as
at 30 June 2014
Our strategy of hiring,
retaining and investing in
our people is a key reason
behind our continued
strong organic growth
Peter Simmonds
Chief Executive
1
dotdigital group plc
Annual Report 2013/2014
Chairman’s
statement
Frank Beechinor-Collins
Non-Executive Chairman
Again, we are delighted to report that
2013/14 has been another successful
year for dotdigital group plc.
In the past year we have aligned our direct
sales activities so that we now primarily
focus on what we define as the mid-market
for our Software-as-a-Service (SaaS) email
platform, dotmailer. As a result, we have
made good progress in signing larger
clients with higher monthly spends who
have a greater propensity to purchase
ancillary services. A considerable amount
of our sales effort this past year has also
focused on exploiting the Magento sales
channel. Magento is part of eBay Enterprise
and has established itself as the world’s
leading ecommerce platform and users
of Magento tend to be high volume email
senders and match the profile of our mid-
market target customers.
Our North American operation has
continued to grow and during this past
year we have signed our largest US clients
to date. Through a strong presence at
the major trade shows in the US, there is
growing recognition of the dotmailer brand,
in particular in the Magento market.
The dotmailer professional services division
has also developed considerably in the past
year, largely due to more effective account
management and our focus on selling
into larger customers.
Our decision during the last financial year
to exit our Agency business has been
vindicated as the focus of management’s
efforts on our core SaaS email business
has ensured that dotdigital has continued
to grow.
The marketing and technical teams
have been busy for the past six months
developing the new brand identity for
dotmailer as well as releasing the latest
version of our dotmailer platform. This work
has been well received by customers and
partners alike and again demonstrates
the business and our ability to sustain our
technical competitive advantage in the
email marketing industry.
Our policy on acquisitions remains
unchanged. Organic growth continues
to be our focus but, from time to time,
consider acquisition opportunities
should they allow us to accelerate
growth in a market or provide us with
a technical advantage.
The dotmailer services
business has also
developed considerably
in the past year, largely
due to more effective
account management
and our focus on selling
into larger customers.
Governance
The Board puts strong emphasis on
ensuring its effectiveness and the
effectiveness of governance processes
across the entire organisation. Monthly
meetings are held with the Board and the
Non-Executives are provided with detailed
management information in advance of
these meetings.
The remuneration, audit and risk
committees meet regularly, ensuring the
Non-Executive Board members are fully
aware of potential issues in the business.
The business holds a regular strategy
review and these reviews include active
involvement by the Non-Executive Board.
2
dotdigital group plc
Annual Report 2013/2014
Outlook
The outlook for dotdigital over the coming
years is very promising with interesting
opportunities both in the UK and overseas.
On behalf of all our stakeholders,
I would like to thank the team at dotdigital
for their fantastic contribution to another
successful year. I would also like to say
a special thank you to the Executive
Management team for its continued
commitment, hard work and passion
in developing the business.
Frank Beechinor-Collins
Non-Executive Chairman
An evolving Board
We continue to review our organisational
structure to ensure we have the requisite
skills to sustain growth and develop
the business.
The business has continued to flourish
under our CEO Peter Simmonds. As the
business grows we have acknowledged
that we need to broaden the skills and
experience of the operational Board.
To this end we have hired a number of
executives from outside the business to
ensure that we have the management
capacity to achieve our objectives.
In addition to the new executive
appointments Milan Patel was promoted
from Financial Controller to Chief Financial
Officer this year and joined the Board.
All of the above underlines our
commitment to effective succession
planning.
Our responsibility as a corporate citizen
dotdigital prides itself on creating a close
working family of employees and we
recognise diversity and equal opportunity
as a way to treat employees and support
them to reach their full potential. We have
many examples of senior and long-standing
employees who joined dotdigital in junior
positions and have moved up through the
business, growing with us.
By aligning our goals with those of our
clients, we consistently deliver products
and services that ensure mutual benefit
and ultimately make both parties more
successful. To this end we foster
strong relationships within the business
community, working closely with partners
and suppliers.
The dotdigital group is committed to
working with local communities in the
areas where we operate. We encourage
and support employees volunteering in the
areas of vocational skills and developing
employability amongst young people.
Through our charitable giving we support
a number of national and international
charities and these donations are evaluated
by our employee-led dotcharity committee.
The Group maintains its commitment
to its environmental responsibilities with
emphasis on the Reduce, Reuse, Recycle
philosophy across all offices, minimising our
impact on the environment.
3
dotdigital group plc
Annual Report 2013/2014
Strategic report
The dotmailer platform
Market-leading provider of email marketing software
I M A G I N AT I O N . . . D E L I V E R E D
dotdigital has grown to become the
leading UK supplier in the provision
of intuitive SaaS products for digital
marketing professionals. The flagship
product, dotmailer, is a powerful email
and cross-channel marketing automation
platform with easy to use tools that enable
large corporations and SME marketers to
efficiently create, manage, execute and
evaluate effective targeted campaigns.
Alongside SaaS technology, the Group
also provides expert email marketing
consultancy and services for businesses
seeking to maximise customer acquisition,
conversion and retention. The Company is
headquartered in London and employed
179 staff at the end of June 2014.
Email is one of the most established online
marketing channels and has year-on-year
consistently been in the top performing digital
channels for return on investment (ROI), as it
can be used effectively to acquire, convert,
retain and grow customers. The Direct
Marketing Association (DMA) Email Marketing
Council’s 2013 National Client Email report
underscores this, where respondents to a poll
indicating an average ROI of £24.93 for every
£1 spent in 2013 on email marketing.
dotmailer is a well-established product and
4
over the past seven years, we have seen
strong evidence of the scalability of the
Group’s platform with monthly send volumes
growing from under 5m sends per month
to currently over 400m sends per month.
The Company has carried out significant
development work on the dotmailer platform
over the years, providing continuous
innovation and functionality to its users. This
includes a highly compelling visual drag and
drop email template editor, drag and drop
segmentation and query builder, drag and
drop campaign automation, translation of
the user interface into eight languages and
responsive template toolkits that optimise
display content and layout on mobile devices
(smartphones and tablets). The Company
also has pre-built integrations with best-in-
class Customer Relationship Management
(CRM) products and ecommerce platforms
such as Salesforce, Microsoft Dynamics,
SalesLogix and Magento.
dotmailer has a broad customer base,
with the five largest clients accounting for
approximately 5% of total revenues (the top
20 clients account for less than 10% of total
revenue). To some extent, this reflects some
of the Group’s historical success in the
SME space but increasingly, the Group is
gaining solid traction in the mid-to-large
corporate market
Example wins in this area include Randstad,
Shortlist Media Limited, Science in Sport,
Hertz, Land Securities Group, Thorntons,
Elemis, Ladbrokes International, Addison Lee
and McLaren. See page 10 for a sample list
of clients.
Email is one of the
most established online
marketing channels and
has consistently year
on year been in the
top performing digital
channels for return on
investment (ROI), as it
can be used effectively
to acquire, convert, retain
and grow customers.
dotdigital group plcAnnual Report 2013/2014
ODEON
Case study
ODEON Cinemas is the number one cinema
operator in Europe and the largest in the world
outside of the Americas. Over the past five years
ODEON has built up a loyalty programme for
regular cinemagoers, called ODEON Première Club
(OPC), which now has a membership of 2+ million.
ODEON needed to turn transactional and behavioural
patterns into targeted customer segments for data-
driven email marketing. But this was proving difficult
with multiple touch points and long turnaround times.
So ODEON chose dotmailer and our Customer
Insight Module and the results have been impressive.
Two statistics standout; 21.6 membership increase
and 19,000 extra bookings from the loyalty club.
However perhaps the most impressive statistic
is the time saved and resultant efficiency gains. It used
to take ODEON four days to run profiles and import the
relevant data to their existing email platform using an
external agency. Now this process is automated within
dotmailer it takes just six minutes to build a list.
y
d
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t
s
e
s
a
C
2+
million members
21.6%
membership increase
19,000
bookings
5
5
dotdigital group plc
Annual Report 2013/2014
dotdigital group plcAnnual Report 2013/2014
Strategic report
Marketing automation
the dotmailer way
The dotmailer platform does everything
marketers need and want to do, helping
them deliver their imagination
Marketing automation involves a range of people and
suppliers working together over a period of time to set up,
monitor and improve the rules and data that automate
marketing. Businesses typically increase the level of
automation over time as other parts of the business also
mature. dotmailer makes it easy for marketers to start on
the marketing automation journey, and then quickly
scale the features and functions used as confidence
grows and ROI becomes clear.
How dotmailer works
Data is at the heart of everything we do:
• Data import
• Customer Insight Module (CIM)
• Application Program Interface (API)
• Customer Relationship Management software (CRM)
Then the clever automation logic :
• Segment & Triggers • Insight & Behavourial
• Lifecycle campaigns
• Transactional data
And finally the delivery of the message :
• Email
• API
and many others
• Mobile
• CRM
• Social
• Ecommerce platform
DATA
LOGIC
MESSAGE
dotmailer is built to
integrate with other
best-of-breed systems.
...to form a best-of-breed
digital marketing cloud so
our customers experience:
• Deeper expertise
• Faster innovation
• Greater extendability
• Better value
SEARCH
SOCIAL
CRM
EMAIL
ANALYTICS
WEB
6
dotdigital group plcAnnual Report 2013/2014 Sustainable differentiation
strategy
From experience we know the areas
that give us competitive advantage
change over time as markets mature
and clients get smarter.
Our product strategy is devised to allows us to maintain
our competitive advantage in all areas, for all clients.
For simplicity we have created persona’s to help
communicate the changing requirements of our
customers. These are represented by the shaded
boxes in the diagram:
Start up Sally
Mid size Martin
Enterprise Edward
People +
strategy
Marketing
automation
Integrations
Support
Price
Ease of use
Simplicity opens the door
Technology is differentiator
People & services key
Market maturity
7
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dotdigital group plcAnnual Report 2013/2014
Strategic report
Our values
On your marks.
Get set.
Grow.
Your success is our success. That’s why
we grow our own people to be the best
they can, so they can help your business
to be the best it can. We don’t do the
status quo. Now, off we grow.
It’s our
business to
know your
business.
We run a business. You run a business.
Bottom lines are top of mind for us.
That’s why everything we do for you –
and ourselves – is considered, thought
through and viable.
8
dotdigital group plc
Annual Report 2013/2014
No nonsense.
Straight. Honest. Open. Truthful (even
if it hurts). We don’t do business speak.
We prefer common sense. That’s
what the best and most successful
relationships are based on.
Two peas.
Same pod.
We attract staff and clients that sing
from the same hymn sheet as us. It’s
an ethos that binds us together. Truth
is, we’re more like family and friends
than a company.
We’re an
unlimited
Company.
We never sit still. Good enough isn’t
good enough for us. We’re always
thinking, always doing, always
creating. Why? We love what we do.
We care about how we do it. We think
you will too.
Our strategy
Over the past five years as a public
company we have enhanced shareholder
value by focusing on profitable growth
and product innovation.
The three-year strategic plan launched in October 2013 is
focused on continuing to deliver strong topline growth through:
Product
innovation
In 2013/14 we delivered significant new product
features including:
•
Program Builder allows users to create
complex email marketing automation
programmes in minutes, based on either
customer behaviour, date, event or
segmentation rule.
•
•
Order insight empowers customers to quickly
analyse their transactional and customer
base to identify the best targets by frequency,
value, and product category.
Web insight allows customers to build
segments and triggers from decisions
and actions made on their site website
Expanding
geographically
In 2013/14, 10% of our revenues etc outside
the UK, compared to 3% in the previous year.
We expect the percentage to increase through
2014/2015.
Developing
strategic
partnerships
In 2013/14 we expanded the numbers of strategic
partners by 118% with particular focus on system
integrators in the CRM and ecommerce sectors,
generalist marketing agencies and specialist email
marketing agencies globally.
We expect an increasing proportion of our
business to originate through these channels
in the coming years.
Identifying
new
customer
niches
Our product team are constantly looking for new
market opportunities that can be satisfied by the
dotmailer offering – for example during 2013 we
focused a team of developers and relationship
managers on building revenues within the mid-
market ecommerce sector.
To date this initiative has created contracted
revenues in excess of £1.2m with significant
potential for further growth. Our strategy is to
continue to identify niches where tight technical
integrations and product innovations combine
with the core dotmailer features to create a clearly
differentiated solution for professional marketers.
9
dotdigital group plc
Annual Report 2013/2014
Strategic report
Our clients
dotmailer is the trusted email marketing partner
of huge success stories. Here are just a few of the
companies we work closely with.
10
dotdigital group plcAnnual Report 2013/2014 dotmailer allows us to do things
we have only dreamed of before.
Amberley Sherman,
Marketing Manager, Cazenove + Lloyd
11
dotdigital group plcAnnual Report 2013/2014 Strategic report
Our people
The dotmailer platform is built and designed to be
flexible and work seamlessly with other platforms out
there. As a company, we like to think we’re the same.
I’ve been in IT Support
for several years and the
service dotmailer provide
is second-to-none. Offering
a wide range of resources,
excellent account
management and a fast,
efficient and responsive
helpdesk – the service
dotmailer offer is fantastic
and constantly evolving
to give more back to
their clients.
Molly Pugh,
Head of Support,
William Reed Business Media
12
12
dotdigital group plcAnnual Report 2013/2014 13
dotdigital group plcAnnual Report 2013/2014 Strategic report
Key performance indicators
We use our key performance indicators (KPI’s) to
measure our business. These indicators provide us
with the visibility of both our strategic and financial
performance. Employee remuneration is specifically
linked to these KPI’s.
Financial
Revenue growth from continuing operation
We aim to deliver double-digit organic revenue growth.
2013
2014
£12,197,000
28% Growth
£16,213,000
33% Growth
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) before exceptional items
We aim to have a positive EBITDA growth.
£4,149,000
21% Growth
£4,697,000
13% Growth
£6,072,000
51% Growth
£9,306,000
53% Growth
2013
2014
Cash position
We aim to have a strong cash position.
2013
2014
14
dotdigital group plcAnnual Report 2013/2014 An extremely powerful platform
which is very simple to use offering
great results.
Roy Rowlands,
Business Development Director, Cognitive Publishing Ltd
Strategic
Volume of emails sent
We aim to keep increasing the amount of emails sent through the system.
45% of sales
2,645,000,000
2013
2014
3,700,000,000 40% of sales
Recurring revenue as a %
We aim to have recurring revenues of over 70%.
2013
2014
Percentage of revenue from customers outside of the UK
We aim to expand internationally.
2013
2014
3% Outside of the UK
76% Recurring revenue
78% Recurring revenue
10% Outside of the UK
UK Revenue
15
dotdigital group plcAnnual Report 2013/2014 Strategic report
Risks, mitigations
and impact
Impact
Mitigation of risk
Risk area
Supplier, computer
hardware and internet
reliability-related risks
Internet Service Providers
(ISPs) reputation – related risks
An event resulting in a hosting centre going offline
for any significant period of time or the termination of
provision of services by one of the Group’s 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
IPv4 addresses, may restrict the capacity of the
business.
As a large proportion of the Group’s revenue is
derived by charging a price per email for sending
marketing emails on behalf of their customers the
impact of not being able to deliver these for any
reason is significant. If abuse complaints from
providers are not dealt with properly or if bad
customer data generates multiple complaints
through ISPs or third party Spam blacklists,
these can impact the platform’s overall ability to
deliver emails.
Hacking & information security
There is a possible risk that a hacking attempt
could result in a denial of service or loss of data.
Competitive environment
International Expansion
The sector the Group operates in is competitive.
The impact of competitors having more features,
increased financial backing, better brand recognition
and better global coverage increases the risk to the
Group’s business model.
As the business expands into new geographic
territories there is a risk that policies and practices
that have worked successfully in the UK market will
not provide the high level of service and assurance
that would have been delivered in the UK market.
16
The design of the platform along with the system’s
architecture has multiple levels of resilience built
in to cater for single points of failure. The Group
continuously evaluates its key suppliers as part
of its risk management process and diversifies
these where possible, to improve resiliency. There
is continued investment into dotmailer’s currently
owned IP addresses, maintaining these to be
reputable for sending email globally, and utilising
them to maximum effect. The Group continues to
monitor its IPv4 capacity and seeks opportunities to
expand its pool or utilise newer technologies to limit
exposure to this risk.
dotmailer provides a number of services as part of
the core product to filter known or bad data that
may not comply to EU or US anti-spam regulations.
It also provides a number of consultancy services
to its customers to better improve their data and
compliance to legislation. The Group continues to
work closely with ISPs and third party Spam lists by
proactively dealing with abuse complaints generated
by customer emails and whilst dotmailer acts as
the data processor on behalf of its customers,
and is not directly liable for breach of the EU or
US anti-spam regulations, it does take these
breaches seriously, terminating customer service
agreements if necessary. Continued investment
into the automatic processing of abuse complaints
generated by customers, monitoring of delivery
rates to ISPs and the regular reviewing of dotmailer’s
reputation on Spam lists continues to reduce the
risk in this area.
The Group’s technical team takes measured actions
across multiple levels to secure the dotmailer
platform and its customers’ data. Continued
investment into the latest technology for threat
detection, remediation and encryption, coupled with
its security policies and regular penetration tests,
greatly reduces the Group’s exposure to this risk.
The Group continues to grow revenues year-on-
year and reinvests to deliver new product features,
best-in-class customer support and service
offerings, enhanced brand recognition, improved
service delivery and markets globally to attract new
customers.
Hiring senior people with experience of developing
successful international business models, hiring
quality local people in important territories and
utilising the services of expert advisers. Introducing
management information and business intelligence
and conducting audits and risk appraisals.
dotdigital group plcAnnual Report 2013/2014 Risk area
Impact
Mitigation of risk
Hire and retain key personnel
The loss of the services of 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, ecommerce and marketing companies.
Investment into talent acquisition hiring programmes
and continuous learning and development has
enabled the Group to hire and retain highly skilled
individuals. Enhanced employee benefits, a
competitive package, a modern and flexible working
environment utilising the latest technologies has
continued to mitigate this risk.
Development of products
There is a possible risk that without continued
investment into new products, enhancement of old
products and into new sectors then the growth of
the Group will be impaired.
Data privacy
Evolving technology and
customer requirements
Such laws and regulations require or may require
the Group and its clients to implement privacy and
security policies, permit consumers to access,
correct or delete personal information stored or
maintained by such companies, inform individuals
of security incidents that affect their personal
information, and, in some cases, obtain consent
to use personal information for certain purposes.
Other possible legislation could, if enacted, impose
additional requirements and prohibit the use of
certain technologies, such as those that track
individuals’ activities on web pages or record
when individuals click on a link contained in an
email message. Such laws and regulations could
restrict the Group’s clients’ ability to collect and use
email addresses, web browsing data and personal
information, which may reduce demand for its
products.
Failure to respond to evolving technological
channels and customer requirements or to
introduce competitive enhancements and new
features may make the dotmailer solution less
competitive. The introduction of new solutions by
competitors potentially makes the Group’s solutions
less attractive or easy to sell. Failure to anticipate
client requirements and successfully develop new
solutions or features may impact growth and
retention of existing clients.
Continued investment into and development of the
Group’s product offerings has enabled good growth.
Responding to existing and prospective customers’
needs through enhanced service and tailored
offerings continues to distinguish dotmailer from its
competitors. Innovation and increased development
of software connectors, enabling partnerships with
third parties, has expanded the customer reach of
the Group. Offering the flexibility to integrate and
connect best-of-breed products with dotmailer
continues to enable the Group’s customers to grow
at their pace without constraints.
dotmailer’s features assist customers to be
compliant in current legislation and in most
cases automates these compliance processes.
It researches the impact of new legislation and its
effect on its customers and publishes industry-wide
white papers and blogs. The Group’s executive
actively contributes to the digital marketing
space to advocate best practice and make sure
its customers’ needs are represented.
Investment in development of new solutions and
enhancements to the platform means that the
Group remains a credible provider of multi-channel
marketing SaaS solutions. SaaS development
requires implementation of rapidly changing
technologies, adhering to standards and regulations,
anticipating client requirements and frequent
product enhancements. Continued emphasis
in recruiting and retaining expert technical and
marketing professionals has enabled the Group to
innovate within its sector.
17
dotdigital group plcAnnual Report 2013/2014 Strategic report
Chief Executive’s
report
Peter Simmonds
Chief Executive
dotdigital has grown to
become a leader in the
provision of intuitive
Software-as-a-Service
(SaaS) products for digital
marketing professionals.
The Email Creative and Managed Services
offering (part of the wider dotmailer division)
has had a very strong performance with an
increase in revenue of 126% to £1.8m over
the comparable period. We are confident that
continued revenue growth can be unlocked
from these new services by generating
ROI for our clients and helping time-poor
marketers to outsource their creative and
campaign management/strategy to email
marketing experts such
as dotdigital.
I am pleased to announce that the
Group delivered revenue growth, EBITDA,
profits and cash position ahead of
market guidance.
Review of 2013/14
Revenue performance was driven by
strong growth of 33% across the dotmailer
core product, ahead of plan.
This performance is a result of continued
strong organic growth in the high margin
and long-term recurring revenues
generated by our core email marketing
product, dotmailer.
Financial highlights
Within the dotmailer core email marketing
product division, revenues for the 12-month
period grew by 33% compared to the same
period in 2013, resulting in closing cash at the
end of the period of £9.3m (2013: £6.1m).
A summary of revenues by division for the full
year to 30 June 2014 is detailed below:
Revenue £m
12m to
30.06.14
12m to
30.06.13
dotmailer
£16.2m
£12.2m
Discontinued * £0.2m
£1.6m
Total Group
£16.4m
£13.8m
%
Change
33%
-88%
19%
* In March 2013 the Board announced its plans
to wind down the Group’s Search Marketing
and Web Design Division, ‘dotAgency’, whilst
continuing to service its existing clients for
the remaining duration of their agreements.
These agreements have now come to an
end culminating in the successful closure
of this division.
This strong organic growth was underpinned
by a combination of successful new client
wins, particularly in the corporate and
mid-market sector, growth in recurring
revenue from existing clients and improved
client retention through having a larger
proportion of clients under contracts of 12-36
months. Notable client wins during the year
included Land Securities Group, Thorntons,
Ladbrokes International, Children with Cancer
and National Express Bus.
Revenues from the US region performed
strongly, increasing from $0.4m to $1.4m,
an increase of over 200% compared to the
same period in 2013. The New York sales
office continues to focus on sector niches
and higher value corporate clients that it
has identified are the most attractive for the
dotmailer product platform.
Penetration into Latin America has also
materialised in the form of working with
Panama’s COPA Airlines, the third largest
carrier in South America, demonstrating how
the dotmailer platform is travelling from our
US base into Central America and beyond.
The US pipeline continues to grow with the
belief it will be beneficial to allocate more
investment in headcount and marketing
activities over the coming year to capitalise
on this territory.
18
dotdigital group plcAnnual Report 2013/2014
Ebay’s Magento Connector
dotdigital fully launched the Magento
connector earlier in the year allowing
ecommerce customers that use the Magento
platform to synchronise their data between
the dotmailer and Magento platforms. The
client sign-up of the new Magento Connector
has been strong with the average monthly
recurring revenue spend for customers of
over £700 per month. The product has been
well received as evidenced by feedback
gained from both clients and Magento
implementation partners. Over 100 clients
are now using this platform with most recent
wins including 7dayshop.com, Elemis, Fraser
Hart, Gorgeous shop, Vax, Heals, Trunki and
Fuji Film in the UK.
The US Region has also demonstrated how
invaluable the Magento relationship has
become over a short period of time with
14 new clients won since the beginning of
the year. Vizio, one of the largest consumer
electronics companies in the US and listed in
the top ten biggest brands in the world using
Magento, is one of the most recent additions
for dotdigital. New Magento partners in the
US also include, Blue acorn, Pod1, Classy
llama, SLI Systems, Celebros and Peer1.
A clear endorsement of the success of
the Magento relationship was recently
demonstrated when dotdigital was awarded
‘Gold Partnership Status’ directly by
Magento, only one in four email service
providers in the world to have been granted
this prestigious status. Marketing efforts
have also been continuous with dotdigital
sponsoring Magento’s premier eCommerce
‘Imagine 2014’ event held in Las Vegas
earlier this year and the ‘MagentoLive’ event
held in London in July of this year.
Cash generation
The business continues to be highly
cash generative with cash at the end of the
period standing at £9.3m, an increase of
53% on the prior year (2013: £6.1m) after
capital expenditure and product development
of £2.0m. The Company continues to be
debt free. Highly efficient cash collection
processes, combined with over 45% of
clients paying retainers by direct debit,
contributed to the Company’s strong cash
position at the year end.
Dividend policy
I am pleased to report that the Board has
conducted a review of the business plans for
the next three years including evaluating the
cash needs for increased investment in both
organic growth and capital expenditure and
has decided that an increase in dividend can
be proposed this year.
Therefore subject to approval at the AGM
on 16 December 2014 the Board proposes
that the Company will pay a dividend of
0.2 pence per share, payable at the end of
January 2015.
Brand positioning
The Company has successfully implemented
a dotmailer re-branding initiative which
incorporates a refresh of the dotmailer
platform, release of powerful new features
and the launch of a new marketing website.
dotdigital also celebrated its 15-year
anniversary and to commemorate this
auspicious landmark the Company hosted
a “15th Birthday Network Party” for over
200 clients, partners and institutional
investors at dotdigital’s new offices at
No.1 London Bridge.
I see dotmailer as an
integral part of my
communications team,
delivering a quality service
that goes far beyond
sending out emails.
Lori Folts,
Head of Marketing Communications,
DHL Express
19
dotdigital group plc
Annual Report 2013/2014
Strategic report
Chief Executive’s
report continued
People
As part of the long-term strategy to build a
high-performing team capable of sustaining
our growth we have made a number of
strategically important hires into the senior
management team during the year.
Over that period we have hired a net
additional 29 sales and account management
staff, 5 additional staff into our marketing
team, 5 into managed service and
design and a further 13 into the product
development and systems team.
These have included:
•
•
•
•
•
HR Director
Marketing Director
IT Director
Customer experience Director
(starts mid October)
Executive Vice-President
US Operations
In addition, we appointed Milan Patel into
the role of CFO in March this year when he
joined the main board.
I am confident that the skills and experience
of the Executive team put us in a strong
position to deliver on the strategy approved
by the Board.
In addition to the senior hires appointed
during the year, we also embarked on a
period of accelerated investment in sales,
marketing and product development.
The goal we set ourselves was to recruit
a further 30 sales and account manager
staff and to strengthen marketing and
product development.
The hiring process has continued through
the autumn of 2013 and throughout 2014.
This has been a significant undertaking
and I have now tasked the senior team
with ensuring that the new staff are fully
integrated into the business and performing
to full capacity. We will also be reviewing
our structure to ensure we have the correct
management processes to support the
enlarged team.
Market size
The consulting firm Econsultancy estimate the
total UK market for email marketing platforms
and services to be worth around £500m.
This, however, includes creative resources in
agencies and client side resources. Our own
estimate of the UK addressable market for
email marketing automation providers is in
the region of £180m with dotmailer enjoying a
market share of 9% in a market with around
30 providers.
Over the past seven years, revenues have
grown 548% from £2.5m to £16.2m (year
to June 2014). This equates to a seven-year
CAGR of 37%, which is higher than the
market growth in that time, reflecting market
share gains.
Over the past seven
years, revenues have
grown 548% from £2.5m
to £16.2m (year to June
2014). This equates to
a seven-year CAGR of
37%, which is higher than
the market growth in that
time, reflecting market
share gains.
Whilst the Group has always enjoyed a
high degree of repeat revenue, much work
has been done in the last two years to shift
its revenues to contractual, recurring
revenues (which reduces churn), with the
sales team incentivised on total contracted
value of deals. The initiative has positively
impacted the stickiness of customers, the
ration of clients on long-term contracts albeit
at the expense of a small erosion in margin as
a result of incentives to sign multi year deals.
20
dotdigital group plcAnnual Report 2013/2014
Danone
(Nutricia) Medical
Case study
The team at Nutricia chose a
combination of Salesforce and dotmailer
to deliver an integrated mailing solution.
The dotmailer platform’s ease of use
has allowed Nutricia to take their
online marketing activities in-house,
allowing their existing team to produce
campaigns quickly and effectively
without having to learn their way around
complex applications.
y
d
u
t
s
e
s
a
C
The key to its success is that
the whole process happens
seamlessly within the system,
with no manual intervention.
The campaign results have
been impressive enjoying an
average open rate of 48%.
Lloyd Ress,
Danone Nutricia
Automation features have been used
to create and roll out multiple content
approaches and messages to different
audiences based upon where they are in
the customer journey lifecycle. dotmailer is
also used to gather customer engagement
and purchasing information and feed back
into the system to refine both targeting and
content for future activity.
21
dotdigital group plc
Annual Report 2013/2014
Strategic report
City & Guilds
Case study
City & Guilds are implementing a four-year
marketing automation roll-out programme
with dotmailer, so they can spend more time
on creative work that has a greater impact
with their customers.
The project is two thirds of the way through and
City & Guilds are enjoying significant and tangible
benefits. Unique email opens frequently beat
50% with click through rates as high as 77%.
The automation programme has helped web
traffic rise by 20% and the rate of new contacts
has increased by 25%. Above all else sales targets
have been beaten by 9%.
Using dotmalier’s advanced features City & Guilds
are personalising messages based upon how and
when people react to the emails. When this campaign
was benchmarked against the results of a standard
single email campaign the results were telling – on
every single indicator the impact and response was
several times that of a simple email, with the triggered
campaign delivering a return on investment of 15:1.
When we saw dotmailer, we
were totally blown away. The
biggest attraction was its ease
of use – it enabled us to move
from a big effort to build a single
email, to using that time to craft
automated and targeted journeys
across multiple emails. Also the
flexibility and reporting, as well
as the ability to segment all our
different email recipients, was
way ahead of anything else
we saw. The decision was a
no-brainer.
Steve Smith
eCRM Manager,
City & Guilds
22
dotdigital group plc
Annual Report 2013/2014
Chief Executive’s
report continued
Growth strategy
During the year we evaluated a number of
potential acquisition opportunities in the
email marketing space. However, as in prior
years none of the businesses evaluated
were judged to be likely to create long-term
shareholder value when execution and
integration risks were factored in.
Therefore our focus remains on organic
growth by selectively investing in sales and
account management staff to concentrate
on key relationships and markets whilst at
the same time investing in the dotmailer
platform to maintain it’s technical lead,
ease of use, and integration.
In September 2013, the Board agreed
to invest around £3.5m to accelerate our
organic growth by hiring a further 30 sales,
account management executives and
increasing marketing spend. This increase in
headcount and additional marketing spend
largely happened in the second half of the
year and it is now starting to be possible to
review the return on investment from this
decision.
Based on the early results there are clear
indications that the potential for significant
further growth exists from greater investment
in the US market and from forming strategic
partnerships globally.
The focus on fast growing medium-sized
businesses and corporate clients has driven
average monthly spend per client up by 32%
and the average contracted monthly spend
of new clients added during the year was
£410. This, combined with a focus on longer
term contracts, (78% of clients are now on
12-24 month contracts) and client retention
is importantly leading to significantly higher
client lifetime values.
Building on the leading position of the
dotmailer brand in the mid-market will be a
key priority for 2015 and the Board believe
that there are significant future growth
opportunities from hiring additional sales
personnel and account management staff
in the US and further building the team
developing strategic partnerships globally.
Outlook
The dotmailer email marketing/marketing
automation platform continues to perform
very strongly in its chosen markets and in
quarter one of the new financial year has
delivered total revenues in line with plan.
The strategy to focus on mid-sized
businesses with higher lifetime values and
lower attrition has demonstrably contributed
to higher services revenues and higher
average monthly contract values, strong
retention and we continue to see strong
demand within this niche both in the UK
and US. We are ever mindful of the need to
constantly innovate and enhance the features
of the dotmailer platform to meet the
needs of today’s ever more demanding
digital marketer. Our product management
and development team are planning over
3-, 12- and 36-month time horizons to
ensure the platform continues to deliver
competitive advantage.
23
dotdigital group plcAnnual Report 2013/2014
Strategic report
Chief Executive’s
report continued
The marketing initiatives to build our US
presence are now starting to deliver a strong
pipeline of new clients, particularly in the
mid-size online retail space which continues
to be a core focus for 2015 and as the
customer base continues to grow we will
need to invest further into local account
management and managed services.
The Board intend to conduct a review of the
progress and opportunities in the US and
South America in the coming months with
a view to potentially investing further.
The focus on developing strategic
partnerships is now resulting in a steadily
growing pipeline of orders from partners in
the UK, US and RoW. In particular, we have
seen the growth in numbers of Magento
partners in the US now referring business,
and we have recently signed a major partner
in Australia, where we have already seen the
first orders flowing from this partnership.
In early October, we launched a white label
partnership to test the market, selling email
marketing into South America using a local
language version of dotmailer. This will be the
basis of further expansion into this large and
growing market.
As part of the rebranding initiative some
significant features have been added to the
dotmailer platform which the board believes
will open up new sales opportunities and
provide enhanced revenue possibilities from
existing clients.
Demand for email marketing and marketing
automation continues to be strong both in
the UK and internationally and whilst the
sector continues to be competitive the Board
believes that the dotmailer platform is well
placed to continue to generate strong organic
growth in revenues over the coming year.
The marketing initiatives
to build our US presence
are now starting to deliver
a strong pipeline of new
clients particularly in the
mid-size online retail
space which continues to
be a core focus for 2015.
24
dotdigital group plc
Annual Report 2013/2014
y
d
u
t
s
e
s
a
C
We found that after just
a year, the ROI on web sales
compared to the campaign
costs is over 5,500%.
Holly Leigh-Harvey,
Operations Director, Cabbages & Roses
Cabbages & Roses
Case study
Upmarket fashion and homewares retailer
Cabbages & Roses does over two-thirds of its
business online and considers effective customer
communication to be one of its key differentiators.
The company sought an email platform that could be
integrated fully with its Magento ecommerce website
solution, and would be effective, easy to use and
reliable. They selected dotmailer and are delighted
with the result.
25
dotdigital group plc
Annual Report 2013/2014
Strategic report
Corporate social
responsibility report
This year dotdigital further developed
its social responsibility activities to
ensure we fully developed and utilised
our human capital for the benefit of our
employees, partners, clients, suppliers
and the wider community.
As a company listed on AIM, dotdigital is
not required to produce a corporate social
responsibility report. However, the Directors
believe that in the interest of transparency
a brief commentary should be included.
Helping our clients win
By aligning our goals with those of our
clients we consistently deliver products
and services that ensure mutual benefit
and ultimately make both parties more
successful.
We care what our clients think of dotmailer
and value their feedback. We collect
this feedback naturally though our close
partnerships and account management
and also in more structured ways such as
surveys and net promoter scoring. We we
know the key is to act on what they tell us
so our products and services constantly
evolve to ensure we adapt to meet their
needs and use our experience and vision
to lead for the future and stay ahead
of the curve.
Our thought leadership and best practice
delivery of marketing automation ensures
we always strive to be the best and our
clients share in this success. Through close
association with industry bodies such the
DMA, we ensure the best interests of our
business and our client’s business are
considered and represented.
Working within our business community
dotdigital fosters strong partnerships within
the business community, working together
with partners and suppliers. As the global
reach of our business continues to extend
we’re delighted to grow our community
partnerships worldwide, building on the
strong foundations created in the UK. We
believe that investing knowledge and time
into partnerships is a key to developing
strong community ties, innovation and
mutual business growth.
The Group works closely with its ever
growing partner network through support
and collaboration. Regular partner meet-
ups allow networking and the development
of sound business relationships. In the
last year we’ve been building technology
partnerships by working with business
community groups and more recently
regularly hosting tech community events
and meet-ups.
As a part of the Group’s strong
commitment to our local business
community, we aim to source local
suppliers wherever possible. dotdigital aims
to work with suppliers with similar ethical
standards and values. At dotdigital we
understand the importance of fair and equal
treatment, and particularly drive towards
transparent and fair payment terms and
processes.
Partnership with our community
The dotdigital Group is committed to
working with our local community. A key
focus in the last year has been our work
with young people in the Croydon area
though a number of initiatives.
Employees have been volunteering
with Code Club, an initiative to teach
programming in primary schools via after
school clubs. Volunteers worked with
four primary schools in the Croydon area,
teaching 9-11 year olds the fundamentals
of programming, allowing them to develop
problem solving, planning and collaboration
skills alongside computational thinking.
In addition, the Group has participated
in consultation with Croydon Council
Youth Development Programme, focusing
on youth employability and life skills
development. dotdigital sponsored the
TEDxYouth@Croydon event, a platform for
young people in Croydon to be inspired
by their peers following the ‘ideas worth
spreading’ philosophy of the global TED
community.
dotdigital, and in particular Simon Bird, has
also taken an active role in the Croydon
Tech City community, working to make
Croydon a go-to location for technology
organisations and in particular start-ups
and driving the growth of Croydon as a UK
technology hub.
26
dotdigital group plcAnnual Report 2013/2014 We select and hire new employees for our
team purely on the basis of; experience,
skills, aptitude and potential without
reference to irrelevant factors such as
race, religion, age, gender or nationality.
We are proud of the diversity of dotdigital
and through culture, leadership and policy
ensure all employees experience a working
environment free from discrimination and
harassment.
This year we reviewed and re-launched our
employee benefit programme to ensure
our employees were provided with an
attractive, relevant and cost-effective suite
of benefits. This programme also ensured
we remained an attractive employer to
support our recruitment activities as part of
our continued growth plans. Key benefits
include; pension provision, health care
insurance, child care vouchers, cycle to
work scheme and season ticket loans.
Between our landmark offices in East
Croydon and our newest office location
on the Thames at London Bridge, we
provide modern, creative and collaborative
environments for our employees, partners
and clients. This promotes a high-quality,
collaborative, team working space that
ensures we continue to provide best of
breed products and services.
Strategic report
The strategic report was approved by a
duly authorised committee of the Board of
Directors on 13 October 2014 and signed
on its behalf by:
Milan Patel
Company Secretary
13 October 2014
The Group’s commitment to charitable
organisations has continued with the
creation of a dotcharity committee
responsible for fundraising initiatives and
events. This year there have been a number
of charities supported including the British
Heart Foundation, Save the Children and
the British Red Cross.
As part of dotdigital’s work with our
community, the Group sustains its
environmental responsibilities with
emphasis on the Reduce, Reuse,
Recycle philosophy across all offices.
Our datacentres set industry standards
in energy efficiency and the very nature
of our products and services are
low-impact on the environment.
Being a great employer
dotdigital prides itself on creating a close
working family of employees – dotfamily.
We recognise diversity and equal
opportunity as a way to treat employees
as individuals with individual needs, and
support and develop employees to reach
their full potential. We have many examples
of senior and long-standing employees who
joined dotdigital in junior positions and have
moved up through the business, growing
with us.
27
dotdigital group plcAnnual Report 2013/2014 Governance
Board of Directors
Executive Directors
Milan Patel ACCA ACSI
Chief Financial Officer
& Company Secretary
Milan joined the Company
in 2007 and was appointed
Group Company Secretary in
2009. Milan is a member of
the Association of Chartered
Certified Accountants, an
associate member of the
Chartered Institute of Securities
and Investments and holds a
BA (Hons) degree in accounting
and finance. Milan has over eight
years’ experience in accounting
and finance within the technology
and logistics industry. He
has been responsible for the
financial and legal aspects of the
reverse acquisition of West End
Ventures PLC, the acquisition of
Netcallidus, admission to Plus
and the introduction to AIM.
He is also responsible for the
Group’s functions in financial
management and reporting,
regulatory compliance, legal
and corporate governance.
Peter Simmonds FCCA
Chief Executive
Simon Bird
President & Co-Founder
“Tink” Ian Taylor
President & Co-Founder
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 Taylor has 20 years’
experiencein the field of digital
communications. With vast
experience of introducing digital
marketing to companies large
and small, he has been pivotal
in the development of digital
marketing since its outset in both
the UK and now the US. Serving
as a key and influential member
of the UK Direct Marketing
Association’s Email Marketing
Council and also the Internet
Advertising Bureau since 2006,
Tink has been judging the Email,
Mobile and Agency categories
at the UK DMA’s awards for
over half a decade whilst also
chairing the Email Marketing
category. In 2014, Tink was
elected as Advisory Committee
Member of the Board of the US
Direct Marketing Association’s
Email Experience Council.
He constantly strives to help
individual organisations, and the
industry as a whole to develop
and progress.
Peter Simmonds commenced
his career in 1976 as a trainee
accountant with Unilever Plc and
has over 30 years of experience
at senior management and board
level, principally in the areas of
banking, insurance, finance,
IT, outsourcing and software.
As well as large company
experience he has considerable
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, software
and internet solutions. As
well as being an experienced
finance professional Peter has
considerable experience of
acquisitions, disposals, post-
acquisition integration, change
management and creating
cultures and structures to
facilitate entrepreneurship
and growth.
28
dotdigital group plcAnnual Report 2013/2014
Non-Executive Directors
Frank Beechinor-Collins
Non-Executive Chairman
Richard Kellett-Clarke, FCA
Non-Executive Director
Simone Barratt
Non-Executive Director
Simone Barratt has over
15 years’ experience of
ecommerce and online
marketing. She has grown
businesses to multi $m
from incorporation. She
has international expansion
experience in Europe and the
AsiaPac. She was appointed
Global President of e-Dialog Inc,
an Ebay company in 2011 with
Income Statement responsibility
for just under $100m business
across USA, EMEA and APAC
and 450 employees.
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 Pickwick Group
Plc to the main market and Brady
Plc to AIM. He is currently the
CEO of Idox Plc, an AIM-listed
specialist software and services
business.
Frank Beechinor-Collins, was
for 11 years, CEO of One Click
HR, an AIM-listed 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 $25m. In notable
addition, Frank was for five 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.
29
dotdigital group plcAnnual Report 2013/2014
Governance
Corporate governance
report
The Board has sought to comply with a
number of the provisions of the Code in so
far as it considers them to be appropriate
for a company of their size and nature. They
make no statement of compliance with the
Code overall and do not ‘explain’ in detail any
aspect of the Code with which they do not
comply.
is determined by the whole Board. The
Directors are conscious of the importance of
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.
Compliance statement
(a) Directors
The details of the Group’s Board, together
with the audit and remuneration committees,
are set out on pages 26–29 and 31–33.
(c) Relations with shareholders
The Group encourages two-way
communications with all its shareholders
and responds quickly to all requests or
queries received.
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 pages 31, 32 and 33.
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.
(b) Directors’ remuneration
As set out on page 32 and 33 and the
remuneration of the Executive Directors
is determined by the Remuneration
Committee, whilst that of the Non-Executives
All shareholders have at least 21 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 34–35 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 35.
(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 their 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.
30
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 30 June 2014 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 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.
dotdigital group plcAnnual Report 2013/2014
Audit committee
report
The Audit Committee is a sub-committee
of the Board. The responsibilities of the
committee 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
Frank Beechinor-Collins and Richard
Kellett-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 30 September 2014
the Committee reviewed the Group’s
preliminary announcement of its results for
the financial year 30 June 2014 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 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
30 June 2014. The Committee concluded
that these budgets were both prudent
and realistic in the context of the
Group’s ambitions.
31
dotdigital group plcAnnual Report 2013/2014 Governance
Remuneration
committee report
The Remuneration Committee
The Company discloses the following
information on Directors’ remuneration
mindful of Rule 19 of the AIM Rules and the
fact that as the Company is quoted on AIM,
it is not required to comply with the Main
Market UK Listing Rules or those aspects
of the Companies Act to listed companies
regarding the disclosure of Directors’
remuneration.
The Committee comprised Richard Kellett-
Clarke (Chairman) and Frank Beechinor-
Collins.
The Secretary to the committee is
Milan Patel, Chief Financial Officer and
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;
(b)
To maintain a competitive programme
which enables the Group to attract and
retain high-calibre executives; and
(c)
To determine the terms of employment
and remuneration for executive directors.
Key elements of remuneration for
Executive Directors
The Committee considers the key elements
in total to ensure there is the right balance
between reward for short-term success and
long-term growth. For executive directors,
this is summarised as follows:
Base pay
Reviewed against:
•
Salary levels in comparable sized
companies listed on AIM;
•
•
•
Market conditions and Company
performance;
Level of pay awards in rest of the
business;
Role and responsibility of the individual
Director.
Benefits
Reviewed against:
•
Aligned to total reward structure for all
employees;
•
Provided on a market competitive basis.
Annual bonus scheme
Reviewed against:
•
Group PBT with an individual
performance element linked to object
delivery;
•
Drive profitability and strategic change
across the Group;
•
Delivery of the overall business strategy.
Service contracts
On 7 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
2 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 benefits
(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 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
Richard Kellett-Clarke
Chairman of Remuneration Committee
12-month period to 30.06.14
Executive Directors
P Simmonds
I Taylor
S Bird
G Fidura (resigned 11 March 2014)
M Patel (appointed 11 March 2014)
Salary/Fees
£’000
Benefits
£’000
140
120
120
53
36
469
7
7
7
4
3
28
Bonus
£’000
90
65
65
-
65
285
Pension
£’000
14
12
12
2
2
42
Total
£‘000
251
204
204
59
111
829
Share based
payment
£‘000
Number of
outstanding
options
-
-
-
2,137,932
2,087,397
-
-
-
-
5
5
32
dotdigital group plcAnnual Report 2013/2014
Non-Executive Directors
F Beechinor-Collins
R Kellett-Clarke
S Barratt
Executive Directors
P Simmonds
I Taylor
S Bird
G Fidura
Non-Executive Directors
F Beechinor-Collins
R Kellett-Clarke
S Barratt
12-month period to 30.06.14
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Pension
£’000
35
30
30
95
-
-
-
-
-
-
-
-
-
-
-
-
Salary/Fees
£’000
Benefits
£’000
120
111
111
80
422
11
7
7
4
29
12-month period to 30.06.13
Bonus
£’000
50
50
50
-
150
Pension
£’000
11
11
11
2
35
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Pension
£’000
35
30
23
88
-
-
-
-
-
-
-
-
-
-
-
-
Number of
outstanding
options
-
-
-
Number of
outstanding
options
-
-
-
2,137,932
Number of
outstanding
options
-
-
-
Total
£‘000
35
30
30
95
Total
£‘000
192
179
179
86
636
Total
£‘000
35
30
23
88
Director 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:
P Simmonds*
I Taylor
S Bird
F Beechinor-Collins
S Barratt
M Patel
No of
shares held
9,573,841
40,267,667
32,267,667
299,194
215,000
382,078
83,005,447
% Holding
3.39
14.24
11.41
0.11
0.08
0.14
29.37
* 2.18% of P 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, SIPPs etc. The beneficiary of the SIPP is Peter Anthony Simmonds.
Directors’ interest in share options
Under the Group’s executive share option scheme the following Directors have the right to acquire ordinary shares.
Executive Director
M Patel
Grant date
22/02/09
22/10/09
11/11/10
13/10/11
No. share
options granted
Option price
(pence)
Date first
exercisable
Expiry
date
60,000
200,000
400,000
400,000
5.000 01/02/2010
01/02/2019
5.000 01/07/2010
01/02/2019
5.125 01/05/2012
31/12/2015
7.250 01/05/2013
01/02/2016
15/10/13
1,027,397
18.250 01/11/2015
31/10/2018
33
dotdigital group plcAnnual Report 2013/2014
Governance
Report of
the Directors
The Directors present their report with the
financial statements of the Company and the
Group for the year ended 30 June 2014.
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 30 June 2014 are as
follows:-
30 June 2014
30 June 2013
Dividends
The Board propose a dividend payment of
£566,000 (2013: £279,000) 0.2p per ordinary
share (2013: 0.1p per ordinary share) to be
distributed to shareholders in respect to the
Group’s reported performance.
The Board’s dividend policy will be reviewed
annually in line with ensuring there is
adequate cash within the business to
maintain high growth strategy.
Directors
I Taylor
S Bird
P Simmonds
F Beechinor-Collins
S Barratt
R Kellett-Clarke
M Patel
G Fidura
Number of
shares held
40,267,667
32,267,667
9,573,841*
229,194**
215,000
-
382,078
-
Percentage
shareholding
%
14.24
11.41
3.39
0.11
0.08
-
0.14
-
Number of
shares held
49,876,667
41,879,667
16,073,841*
674,194**
215,000
-
-
-
Percentage
shareholding
%
17.98
15.09
5.79
0.24
0.08
-
-
-
Directors
The Directors shown below have held
office during the period from 1 July 2013
to the date of this report.
** Frank Nominees Limited holds 2.18% in respect of P Simmonds holding/voting rights
act as nominee for Trust Alliance Pensions Limited. Frank Nominees is a vehicle used by
Kleinwort Benson Limited to hold securities for clients, trusts, SIPPs etc.
The beneficiary of the SIPP is Peter Anthony Simmonds.
I Taylor
S Bird
P Simmonds
R Kellett-Clarke
F Beechinor-Collins
S J Barratt
** The 229,194 share shown as being held by Mr Beechinor-Collins are owned by
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 30 June 2014 are
as follows:-
G Fidura (resigned 11 March 2014)
M Patel (appointed 11 March 2014)
Executive Directors
M Patel
30.6.14
Number of
options held
30.6.13
Number of
options held
2,087,397
1,060,000
Substantial interests
On 8 October 2014, 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:
Shareholder
I Taylor
S Bird
Lion Trust Asset Management
Investec Asset Management
Old Mutual Global Investors
River and Mercantile Asset Management
Unicorn Asset Management
Franklin Templeton
Peter Simmonds
Number of
shares held
40,276,667
32,276,667
24,817,058
24,519,000
21,629,329
11,000,000
9,849,072
9,700,000
9,573,841
Percentage
shareholding
%
14.24
11.41
8.75
8.65
7.75
3.88
3.47
3.42
3.39
•
•
•
•
•
•
•
•
34
dotdigital group plcAnnual Report 2013/2014
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 its
exposure to financial risk are set out in
Note 22 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.
Product development
In the markets in which the Group operates,
effective 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 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 29 March 2011. N+1
Singer are the Group’s nominated advisors
and together with Finncap are the joint
brokers. The closing mid-market share
price at 30 June 2014 was 33.12p (2013:
14.875p).
Statement of Directors’ responsibilities
The Directors are responsible for preparing
the Report of the Directors and the financial
statements in accordance with applicable law
and regulations.
Company law requires the Directors to
prepare financial statements for each financial
year. Under that law the Directors have
elected to prepare the financial statements
in accordance with International Financial
Reporting Standards as adopted by the
European Union. Under company law the
Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Company and the Group and of the
profit or loss of the Group for that period.
In preparing these financial statements, the
Directors are required to:
•
•
•
•
select suitable accounting policies and
then apply them consistently;
make judgements and accounting
estimates that are reasonable and
prudent;
state whether the Group and parent
Company financial statements have
been prepared in accordance with
IFRSs as adopted by the European
Union subject to any materials
departures disclosed and explained
in the financial statements.
prepare the financial 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
sufficient to show and explain the company’s
and the Group’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
the Group and enable them to ensure
that the financial 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.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Statement as to disclosure of information
to auditors
So far as the Directors are aware, there is
no relevant audit information (as defined 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, Jeffreys Henry LLP, will
be proposed for re-appointment at the
forthcoming Annual General Meeting.
On behalf of the Board
M Patel
Director
13 October 2014
35
dotdigital group plcAnnual Report 2013/2014 Governance
Report of the
independent auditors
We have audited the financial statements
of dotdigital group plc for the year
ended 30 June 2014, 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.
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.
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
circumstances and have been consistently
applied and adequately disclosed; the
reasonableness of significant accounting
estimates made by the Directors; and
the overall presentation of the financial
statements. In addition, we read all the
financial and non-financial information
in the Chairman’s report, Strategic
report, Corporate Governance report,
Audit Committee report, Remuneration
Committee report, and Directors report
to identify material inconsistencies with
the audited financial statements and to
identify any information that is apparently
materially incorrect based on, or materially
inconsistent with, the knowledge acquired
by us in the course of performing the
audit. If we become aware of any apparent
material misstatements or inconsistencies
we consider the implications for our report.
In our opinion the information given in
the Report of the Directors and Strategic
Report for the financial year for which
the group financial statements are
prepared is consistent with the Group
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 Group, or returns
adequate for our audit have not been
received from branches not visited by
us; or
The Group 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.
Respective responsibilities of
Directors and Auditors
As explained more fully in the Statement
of Directors’ Responsibilities set out on
page 35, the Directors are responsible
for the preparation of the group 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.
Opinion on financial statements
In our opinion the financial statements:
•
•
•
Give a true and fair view of the state
of the Group’s affairs as at 30 June
2014 and of its profit for the year
then ended;
Have been properly prepared in
accordance with IFRSs as adopted
by the European Union;
The financial statements have been
prepared in accordance with the
requirements of the Companies
Act 2006 and Article 4 of the IAS
regulation.
Opinion on other matter prescribed
by the Companies Act 2006
36
Jonathan Isaacs
Senior Statutory Auditor
For and on behalf of
Jeffreys Henry LLP (Statutory Auditors)
Finsgate 5-7 Cranwood Street
London EC1V 9EE
13 October 2014
dotdigital group plcAnnual Report 2013/2014 Financial
statements
Contents
38 Consolidated income statement
38 Consolidated statement of comprehensive income
39 Consolidated statement of financial position
40 Company statement of financial position
41 Consolidated statement of changes in equity
42 Company statement of changes in equity
43 Consolidated statement of cash flows
43 Company statement of cash flows
44 Notes to the consolidated financial statements
68 Company information
37
dotdigital group plcAnnual Report 2013/2014Financial statements
Consolidated income statement
For the year ended 30 June 2014
Notes
30.6.14
£’000
30.6.13
£’000
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Profit before income tax
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations
Profit for the year
Attributable to the owners of the parent:
Profit for the year from continuing operations
Loss for the year from discontinuing operations
Profit for the year attributable to the owners of the parent
Earnings per share from continuing operations (pence per share)
Basic
Diluted
Earnings per share from continuing and discontinued operations
(pence per share)
Basic
Diluted
Adjusted earnings per share from continuing and discontinued
operations (pence per share)
Adjusted excluding exceptional items
Adjusted diluted
16,213
(1,533)
14,680
(11,059)
3,621
20
3,641
(181)
3,460
(41)
3,419
3,460
(41)
3,419
1.24
1.19
1.22
1.18
1.22
1.18
7
6
7
8
4
4
11
11
11
11
11
11
Consolidated statement of comprehensive income
For the year ended 30 June 2014
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations
Total comprehensive income attributable to:
Owners of the parent
Total comprehensive income for the year
Comprehensive income from continuing operations
Comprehensive income from discontinued operations
38
Notes
30.6.14
£’000
3,419
(4)
3,415
3,456
(41)
12,197
(887)
11,310
(7,338)
3,972
13
3,985
(220)
3,765
(3,023)
742
3,765
(3,023)
742
1.36
1.32
0.27
0.26
1.11
1.07
30.6.13
£’000
742
(2)
740
3,763
(3,023)
dotdigital group plcAnnual Report 2013/2014 Consolidated statement of financial position
For the year ended 30 June 2014
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and machinery
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
Reverse acquisition reserve
Other reserves
Retranslation reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Deferred tax
Current liabilities
Trade and other payables
Current tax payable
Total liabilities
Total equity and liabilities
Notes
30.6.14
£’000
30.6.13
£’000
12
13
14
16
17
18
19
19
19
19
19
23
20
609
2,991
827
4,427
3,662
9,306
12,968
17,395
1,414
5,147
(4,695)
82
(6)
12,211
14,153
609
2,449
472
3,530
2,893
6,072
8,965
12,495
1,387
4,863
(4,695)
13
(2)
9,071
10,637
58
14
2,984
200
3,184
3,242
17,395
1,681
163
1,844
1,858
12,495
The financial statements were approved and authorised for issue by the Board of Directors on 13 October 2014
and were signed on its behalf by
M Patel
Director
Company registration number: 06289659 (England and Wales)
39
dotdigital group plcAnnual Report 2013/2014Financial statements Company statement of financial position
For the year ended 30 June 2014
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
Other reserves
Retained earnings
Total equity
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Notes
30.6.14
£’000
30.6.13
£’000
15
16
17
18
19
19
19
20
5,186
5,186
3,845
109
3,954
9,140
1,414
5,147
82
2,423
9,066
74
74
74
9,140
5,186
5,186
5,423
70
5,493
10,679
1,387
4,863
13
3,065
9,328
1,351
1,351
1,351
10,679
The financial statements were approved and authorised for issue by the Board of Directors on 13 October 2014
and were signed on its behalf by
M Patel
Director
Company registration number: 06289659 (England and Wales)
40
dotdigital group plcAnnual Report 2013/2014 Consolidated statement of changes in equity
For the year ended 30 June 2014
Balance as at 1 July 2012
Issue of share capital
Reclassification of reserves
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2013
Issue of share capital
Dividends
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2014
Balance as at 1 July 2012
Issue of share capital
Reclassification of reserves
Share based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2013
Issue of share capital
Dividends
Share based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2014
Called up
share capital
£’000
1,377
10
–
10
–
–
–
1,387
27
–
27
–
–
–
1,414
Reserve
acquisition
reserve
£’000
(4,695)
–
–
–
–
–
–
–
(4,695)
–
–
–
–
–
–
–
(4,695)
Retained
earnings
£’000
8,202
–
127
127
742
–
742
9,071
–
(279)
(279)
3,419
–
3,419
12,211
Other
reserves
£’000
127
–
(127)
13
(114)
–
–
–
13
–
–
69
69
–
–
–
82
Share
premium
£’000
4,755
108
–
108
–
–
–
4,863
284
–
284
–
–
–
5,147
Total
equity
£’000
9,766
118
–
13
131
742
(2)
740
10,637
311
(279)
69
101
3,419
(4)
3,415
14,153
Retranslation
reserve
£’000
–
–
–
–
–
–
(2)
(2)
(2)
–
–
–
–
–
(4)
(4)
(6)
• Share capital is the amount subscribed for shares at nominal value.
• Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
• Share premium represents the excess of the amount subscribed for share capital over the nominal value
of the net share issue expenses.
• Retranslation reserve relates to the retranslation of a foreign subsidiary into the functional currency
of the Group.
• 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.
41
dotdigital group plcAnnual Report 2013/2014Financial statements Company statement of changes in equity
For the year ended 30 June 2014
Balance as at 1 July 2012
Issue of share capital
Reclassification of reserves
Transactions with owners
Profit for the year
Other compressive income
Total comprehensive income
Balance as at 30 June 2013
Issue of share capital
Dividends
Transactions with owners
Loss for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2014
Balance as at 1 July 2012
Issue of share capital
Reclassification of reserves
Share based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2013
Issue of share capital
Dividends
Share based payments
Transactions with owners
Loss for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2014
Called up
share capital
£’000
1,377
10
–
10
–
–
–
1,387
27
–
27
–
–
–
1,414
Retained
earnings
£’000
129
–
127
127
2,809
–
2,809
3,065
–
(279)
(279)
(363)
–
(363)
2,423
Other
reserves
£’000
127
–
(127)
13
(114)
–
–
–
13
–
69
69
–
–
–
82
Share
premium
£’000
4,755
108
–
108
–
–
–
4,863
284
–
284
–
–
–
5,147
Total
equity
£’000
6,388
118
–
13
131
2,809
–
2,809
9,328
311
(279)
69
101
(363)
–
(363)
9,066
• Share capital is the amount subscribed for shares at nominal value.
• Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
• Share premium represents the excess of the amount subscribed for share capital over the nominal value
of the net share issue expenses.
• Other reserves relate to the charge for the share based payment in accordance with International Financial
Reporting Standard 2.
42
dotdigital group plcAnnual Report 2013/2014 Consolidated statement of cash flows
For the year ended 30 June 2014
Cash flows from operating activities
Cash generated from operations
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of intangible fixed assets
Purchase of tangible fixed assets
Interest received
Net cash flows used in investing activities
Cash flows from financing activities
Equity dividends paid
Share issue
Net cash flows from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Increase in cash and cash equivalents from continuing operations
Increase in cash and cash equivalents from discontinuing operations
Increase in cash and cash equivalents
Notes
28
29
29
30.6.14
£’000
5,297
(100)
5,197
(1,408)
(607)
20
(1,995)
(279)
311
32
3,234
6,072
9,306
3,268
(34)
3,234
30.6.13
£’000
3,817
(253)
3,564
(1,352)
(292)
13
(1,631)
–
118
118
2,051
4,021
6,072
2,076
(25)
2,051
The above does not include the effect of foreign exchange rate changes on cash and cash equivalents due to its
immaterial nature.
Company statement of cash flows
For the year ended 30 June 2014
Cash flows from operating activities
Cash generated from operations
Net cash generated from operating activities
Cash flows from financing activates
Loan from Group companies
Equity dividends paid
Share issue
Net cash flows from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
28
29
29
30.6.14
£’000
30.6.13
£’000
7
7
–
(279)
311
32
39
70
109
(273)
(273)
142
–
118
260
(13)
83
70
43
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements
For the year ended 30 June 2014
1. General information
dotdigital group plc (“dotdigital”) is a company incorporated in England and Wales and quoted on the AIM
Market. The address of the registered office is disclosed on the inside back cover of the financial statements.
The principal activity of the Group is described on page 4.
2. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRS’s as adopted by the EU) and those parts of Companies Act 2006 that
applies 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.
New and amended standards adopted by the Company
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning
on or after 1 July 2013 that would be expected to have a material impact on the Group.
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 1 July 2013 and have not been early adopted:
Reference
Title
Summary
Amendments
to IFRS 2, IFRS 3
Amendments
to IAS 19
IFRS 9
IAS 36
IAS 39
IFRS 21
IFRS 10, IFRS 12,
IAS 27
IAS 32
IFRS 14
IFRS 15
IFRIC 21
Amendments
resulting from Annual
Improvements 2010-
12 Cycle
Defined Benefit
Plans: Employee
Contributions
Financial Instruments
IFRS 2: clarifies definition of vesting conditions
IFRS 3: clarifies contingent consideration in a business combination
Clarifies that the treatment of contributions when they are
independent
of the number of years of service
Revised standard for accounting for financial instruments
Impairment of assets
Limited scope amendments to disclosure requirements
Hedge accounting and
novation of derivatives
Accounting for
levies imposed by
governments
Exception from
consolidation for
‘investment entities’
Financial instruments:
Presentation
Regulatory deferral
accounts
Revenue from
contracts with
customers
Levies
Provides relief from discontinuing hedge accounting when novation
of
a hedging instrument to a central counterparty meets specified
criteria
Clarifies that the obligating event giving rise to a liability to pay a levy
is
the activity described in the relevant legislation that triggers payment
of the levy
Amendments have been made to define an ‘investment entity’
and to introduce an exception from consolidation and the required
disclosures
Clarifies the requirements for offsetting of financial assets and
financial liabilities
Aims to enhance the comparability of financial reporting by entities
subject to rate-regulations
Specifies how and when to recognise revenue from contracts as
well
as requiring more information and relevant disclosures
Provides guidance on when to recognise a liability for government
levies
Application
date of
standard
1 July 2014
Application
date of
Group
1 July
2014
Periods commencing
on or after 1 July 2014
1 January
2015
Periods commencing on
or after 1 January 2015
Periods commencing on
or after 1 January 2014
Periods commencing on
or after 1 January 2014
1 January
2015
1 January
2014
1 January
2014
Periods commencing on
or after 1 January 2014
1 January
2014
Periods commencing on
or after 1 January 2014
1 January
2014
Periods commencing on
or after 1 January 2014
Periods commencing on
or after 1 January 2016
Periods commencing on
or after 1 January 2017
1 January
2014
1 January
2016
1 January
2017
Periods commencing on
or after 1 January 2014
1 January
2014
The Directors anticipate that the adoption of these standards and the interpretations in future periods will have no material impact on the
financial statements of the Group.
The financial statements are presented in sterling (£), rounded to nearest thousand pound.
44
dotdigital group plcAnnual Report 2013/2014 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.
share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition
is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised
directly in the income statement.
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:
Subsidiaries
A subsidiary is an entity whose operating and financing
policies are controlled by the Group. Subsidiaries are
consolidated from the date on which control was
transferred to the Group. Subsidiaries cease to be
consolidated from the date the Group no longer has
control. Intercompany transactions, balances and
unrealised gains on transactions between Group
companies have been eliminated on consolidation.
• The 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 30 April 2008. However, in
accordance with IFRS3 ‘Business combinations’
the equity structure appearing in the consolidated
financial statements reflects the equity structure of
the legal parent dotdigital, including the equity
instruments issued under the share exchange to
effect the business combination;
• A reverse acquisition reserve has been created to
enable the presentation of a consolidated balance
sheet which combines the equity structure of the
legal parent with the non statutory reserves of the
legal subsidiary;
• Comparative numbers are prepared on the
same basis.
The following accounting treatment has been applied in
respect of the acquisition of dotdigital:
•
•
The assets and liabilities of dotdigital 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
As a result of applying reverse acquisition accounting
since 30 January 2009, the consolidated IFRS financial
information of dotdigital Group Plc is a continuation of
the financial information of dotmailer Limited.
Revenue recognition
Revenue comprises 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.
Going concern
The directors, at the time of approving the financial
statements, a reasonable expectation that the
Company and the Group have adequate resources
to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going
concern basis of accounting in preparing the
Financial statements. Further detail is contained in
the strategic review.
45
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
Operating profit
Operating profit is stated after charging operating
expenses but before finance costs.
Exceptional items
Exceptional items are non-recurring material items
which are outside the normal scope of the Group’s
ordinary activities such as costs arising from the
impairment of investments and closure of divisions.
Such items are disclosed separately within the
financial statements.
Dividends
Final dividend distributions to the Company’s
shareholders are recognised as a liability in the financial
statements in the period in which the dividends are
approved by the Company’s shareholders while interim
dividends distributions are recognised in the period in
which the dividends are declared and paid.
Goodwill
Goodwill represents the excess of the fair value of the
consideration over the fair values of the identifiable net
tangible and intangible assets acquired.
Under IFRS 3 “Business Combinations” goodwill
arising on acquisitions is not subject to amortisation
but is subject to annual impairment testing. Any
impairment is recognised immediately in the income
statement and not subsequently reversed.
Investments in subsidiaries
Investments are held as non-current assets at cost less
any provision for impairment. Where the recoverable
amount of the investment is less then the carrying
amount, impairment is recognised.
Intangible assets
Intangible assets are recorded as separately identifiable
assets and recognised at historical cost less any
accumulated amortisation. These assets are amortised
over their useful economic lives 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 and until economic benefit can be
received and recognised, this expense is taken to
the income statement and useful lives are reviewed
on an annual basis. Amortisation is charged from
the point when the assets is available for use.
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.
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
46
dotdigital group plcAnnual Report 2013/2014 • 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.
• Impairment of non financial assets
(excluding goodwill)
At each balance sheet date, the Group reviews
the carrying amounts of its tangible and intangible
assets to determine whether there is any indication
that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the
asset does not generate cash flows that are
independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit
to which the asset belongs. An intangible asset with
an indefinite useful life is tested for impairment
annually and whenever there is an indication that
the asset may be impaired.
Property, plant and equipment
Tangible non current assets are stated at historical
cost less accumulated depreciation. Historical cost
includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the assets carrying
amount or recognised as a separate asset, as
appropriate, only when it is probable that future
economic benefits are associated with the item will
flow to the company and the cost of the item can be
measured reliably. The carrying amount of the replaced
part is derecognised. All other repairs and maintenance
are charged to the income statement during the
financial period in which they are incurred. Depreciation
is provided at the following rates in order to write off
each asset over its estimated useful life and 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:
over the term of the lease
25% on cost
25% on cost
The asset’s residual values and useful economic lives
are reviewed and adjusted, if appropriate, at each
reporting date. An asset’s carrying amount is written
down immediately to its recoverable amount if the
asset’s carrying amount is greater 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.
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 equivalents and equity
attributable to the owners of the parent as disclosed
in the Statement of Changes in Equity.
Taxation
The tax expense for the year comprises current
and deferred tax. Tax is recognised in the Income
statement, extent to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in
other comprehensive income for directly in equity,
respectively.
Current tax
Current taxes are based on the results shown in the
financial statements and are calculated according to
local tax rules, using tax rates enacted or substantially
enacted by the balance sheet date.
Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amounts in the financial statements.
Deferred income tax assets are recognised to the
extent that it is probable that future taxable profit will
be available against which the temporary difference will
be utilised.
Deferred income tax is determined using tax rates
that have been enacted or substantially enacted by
the balance sheet date and are expected to apply
when they related deferred income asset is realised
or deferred income tax liability is settled.
Operating leases
Rent payable under operating leases is not recognised
in the Group’s statement of financial position. Such
costs are expensed 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.
Financial instruments
Financial assets and financial liabilities are recognised
on the statement of financial position when an entity
becomes a party to the contractual provisions of the
instruments. Financial assets and financial liabilities
are initially measured at fair value. Transaction costs
that is directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than
47
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
financial assets and financial liabilities at fair value
through profit or loss) are added to or deducted from
the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition
of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in
the income statement.
• Financial assets
The Group’s accounting policies for financial assets
are set out below.
Management determine the classification of its
financial assets at initial recognition depending
on the purpose for which the financial assets
were acquired and where allowed and appropriate,
revaluate this designation at every reporting date.
All financial assets are recognised on a trade date
when, and only when, the Group becomes a party
to the contractual provisions of an instrument. When
financial assets are recognised initially, they are
measured at fair value plus transaction costs,
except for those finance assets classified as at fair
value through profit or loss (‘FVTPL’), which are
initially measured at fair value.
Financial assets are classified into the following
specified categories: financial assets at FVTPL,
’held-to-maturity’ investments, ‘available for sale’
(AFS) financial assets and loans and receivables.
The classification depends on the nature and
purpose of the financial assets and is determined
at the time of recognition.
Derecognition of financial assets occurs when the
rights to receive cash flows from the investments
expire or are transferred and substantially all of the
risks and rewards of ownership have been
transferred.
At each reporting date, financial assets are reviewed
to assess whether there is objective evidence of
impairment. If any such evidence exists, impairment
loss is determined and recognised based on the
classification of the financial asset.
Loans and receivables (including trade receivables,
prepayments, deposits and other receivables, cash
and bank balances) are non-derivative financial
assets with fixed or determinable payments that are
not quoted on an active market. At each reporting
date subsequent to initial recognition, loans and
receivables are carried at amortised cost using the
effective interest method, less any identified
impairment losses.
48
An impairment loss is recognised in the statement
of comprehensive income when there is objective
evidence that the asset is impaired, and is
measured as the difference between the asset’s
carrying amount and the present value of estimated
future cash flows discounted at the original effective
interest rate. Impairment losses are reversed in
subsequent periods when an increase in the asset’s
recoverable amount can be related objectively to an
event occurring after the impairment was
recognised, subject to a restriction that the carrying
amount of the asset at the date the impairment is
reversed does not exceed what the amortised cost
would have been had the impairment not been
recognised.
• Cash and cash equivalents
Cash and cash equivalents comprise cash at bank
and on hand, demand deposits with banks and
other financial institutions, and short-term, highly
liquid investments that are readily convertible into
known amounts of cash and which are subject to
an insignificant risk of changes in value, having been
within three months of maturity at acquisition. Bank
overdrafts that are repayable on demand and form
an integral part of the Group’s cash management
are also included as a component of cash and cash
equivalents for the purpose of the consolidated
statement of cash flows.
• Trade receivables
Trade receivables are recognised initially at the lower
of their original invoiced value and recoverable
amount. A provision is made when it is likely that
the balance will not be recovered in full. Terms on
receivables range from 30 to 90 days.
• Financial liabilities and equity
Financial liabilities and equity are recognised on
the Group’s statement of financial position when
the Group becomes a party to a contractual
provision of an instrument. Financial liabilities and
equity instruments issued by the Group are
classified according to the substance of the
contractual arrangements entered into and the
definitions of a financial liability and an equity
instrument. An equity instrument is any contract
that evidences a residual interest in the assets of
the Group after deducting all of its liabilities. Equity
instruments issued by the Group are recognised
at the proceeds received, net of transaction costs.
The Group’s financial liabilities include trade
payables and accrued liabilities.
• Trade payables
Trade payables are recognised initially at fair value
and subsequently measured at amortised cost
using the effective interest method. Terms on
accounts payables range from 10 to 90 days.
dotdigital group plcAnnual Report 2013/2014
Foreign currency risk
Currency risk is the risk that the holding of foreign
currencies will affect the Group’s position as a result
of a change in foreign currency exchange rates. The
Group has no significant foreign currency risk as
most of the Group’s financial assets and liabilities are
denominated in functional currencies of relevant
group entities. Accordingly, no quantitative market
risk disclosures or sensitivity analysis for currency risk
have been prepared.
The results and financial position of all the group
entities (none of which has the currency of a hyper-
inflationary economy) that have a functional currency
different from the presentation currency are translated
into the presentation currency as follows:
(a) Assets and liabilities for each balance sheet
presented are translated at the closing rate at the
date of that balance sheet;
(b) Income and expenses for each income statement
are translated at average exchange rates (unless
this average is not a reasonable approximation of
the cumulative effect of the rates prevailing on the
transaction dates, in which case income and
expenses are translated at the rate on the dates of
the transactions); and
(c) All resulting exchange differences are recognised in
other comprehensive income.
Equity
Share capital is the amount subscribed for shares at
their nominal value.
Share premium represents the excess of the amount
subscribed for the share capital over the nominal value
of the respective shares net of share issue expenses.
Retained earnings represent the cumulative earnings of
the Group attributable to equity Shareholders.
The reverse acquisition reserve relates to the
adjustment required by accounting for the
reverse acquisition in accordance with 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” measures their value, and the
corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments
granted. The fair value of those equity instruments is
measured at the grant date using the trinomial method.
The expense is apportioned over the vesting period of
the financial instrument and is based on the number
which is expected to vest and the fair value of those
financial instruments at the date of grant. If the equity
instruments granted vested immediately, the expense
is recognised in full.
Functional currency translation
• Functional and presentation currency
Items included in the financial statements of the
company are measured using the currency of the
primary economic environment in which the entity
operates (functional currency), which is mainly
pounds sterling (£) and it this currency the financial
statements are presented in.
• Transaction and balances
Foreign currency transactions are translated in to
the functional currency using exchange rates
prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the
settlement of such transactions and from the
translation at the year end exchange rates of
monetary assets and liabilities denominated in
foreign currencies are recognised in the income
statement.
Employee benefit costs
The Group operates a defined contribution pension
scheme. Contributions payable by the Group’s pension
scheme are charged to the income statement in the
period in which they relate.
Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provide to the
chief operating decision-maker. The chief operating
decision maker who is responsible for allocating
resources and assessing performance of the operating
segments as identified by the board of directors.
49
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions
regarding the future. Estimates and judgements are
continually evaluated based on historical experience
and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances. In the future, actual experience may
differ from these estimates and assumptions. The
estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying
amounts of assets and liabilities within the next
financial year are discussed below.
• Judgements
(a) Capitalisation of development costs
Our business model is underpinned by our
email and cross-channel marketing automation
platform, dotMailer. Internal activities are continually
undertaken to enhance and maintain the product
in a bid to stay ahead of our competition.
Management review the work of developers during
the period and make the following judgements:
• Internal work relating to product development
is reviewed against IAS 38 criteria and will be
capitalised if management feel the criteria have
been met.
• Internal work relating to the maintenance of
existing products is expensed to the income
statement and accounted for in payroll costs.
• Estimates and assumptions
(a) Impairment testing of goodwill
The Directors have carried out a detailed impairment
review in respect of goodwill. The Group assesses
at each reporting date whether there is an indication
that an asset may be impaired, by considering
the net present value of discounted cash flows
forecasts which have been discounted using a pre-
tax discount rate of 10%. The cash flow projections
are based on the assumption that the Group can
realise projected sales. A prudent approach has
been applied with no residual value being factored.
Further detail on the estimates and assumptions we
make in our annual impairment testing of goodwill
are included in Note 12 to the Financial Statements.
At the period end, based on these assumptions
there was no indication of impairment to carrying
value of goodwill.
(b) Share-based compensation
Key management believe that there will not be
only one acceptable choice for estimating the fair
value of share-based payment arrangements. The
judgments and estimates that management apply in
determination of the share-based compensation are
summarise below:
• Selection of a valuation model
• Making assumptions used in determining
the variables used in a valuation model
i. expected life,
ii. expected volatility,
iii. expected dividend yield
iv. interest rate
Further detail on the estimates and assumptions
we make in our share-based compensation are
included in Note 27 to the Financial Statements. The
charge made to income statement for the period is
also disclosed here.
(c) Depreciation and amortisation
The Group depreciates short leasehold, fixture
and fittings, computer equipment and amortises
computer software, internally generated
development costs and domain names on a
straight-line method over the estimated useful lives.
The estimated useful lives reflect the directors’
estimate of the periods that the Group intends to
derive future economic benefits from the use of
the Group’s short leasehold, fixture and fittings,
computer equipment, computer software, internally
generated development costs and domain names.
(d) Bad debt provision
We perform ongoing credit evaluations of our
customers and grant credit based upon past
payment history, financial condition, and anticipated
industry conditions. Customer payments are
regularly monitored and a provision for doubtful
accounts is established based upon specific
situations and overall industry conditions. Hence the
provision is maintained for potential credit losses
based upon management’s assessment of the
expected collectability of all accounts receivable. In
making this assessment, management takes into
consideration (i) any circumstances of which we
are aware regarding a customer’s inability to meet
its financial obligations; and (ii) our judgements
as to potential prevailing economic conditions
in the industry and their potential impact on the
Company’s customers.
3. Segmental reporting
The Group’s single line of business is the provision
of web based marketing services.
More than 90% of the Group’s revenue arises in
the UK and all of the Group’s non-current assets
are held there.
There are no customers who account for more than
10% of revenue (2013: none)
50
dotdigital group plcAnnual Report 2013/2014 4. Discontinued operations
Discontinued operations refers to the closure of the Service Division.
Analysis of continuing and discontinued operations is as follows:
Year ended 30 June 2014
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss) before exceptional items
Finance income
Income tax
Profit/(loss) for the year attributable to owners of the parent
Year ended 30 June 2013
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss) before exceptional items
Exceptional item: Impairment to goodwill
Finance income including exceptional items
Income tax
Profit/(loss) for the year attributable to owners of the parent
5. Employees and Directors
Wages and salaries
Social security costs
Other pension costs
The average monthly number of employees during the year are as follows:
Directors
Sales
Web designers, SEO and developers
Administration
Remuneration of key management personel is included in note 25.
Continuing
operations
30.6.14
£’000
16,213
(1,533)
14,680
(11,059)
3,621
20
(181)
3,460
Continuing
operations
30.6.13
£’000
12,197
(887)
11,310
(7,338)
3,972
–
13
(220)
3,765
30.6.14
£’000
6,024
679
147
6,850
30.6.14
7
80
41
44
172
Discontinued
operations
30.6.14
£’000
199
(122)
77
(118)
(41)
–
–
(41)
Discontinued
operations
30.6.13
£’000
1,651
(1,033)
618
(1,315)
(697)
(2,326)
–
–
(3,023)
30.6.13
£’000
4,222
475
97
4,794
30.6.13
7
60
46
41
154
51
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
6. Net finance income
Finance income:
Deposit account interest
7. Operating profit before exceptional items
Costs by nature
Profit from continuing operations has been arrived after charging/(crediting):
Direct marketing
Outsourcing
Other costs
Total cost of sales
Staff related costs (inc Directors emoluments)
Operating leases: Land and buildings
Operating lease: Other
Audit remuneration
Amortisation of intangibles
Depreciation charge
Legal, professional and consultancy fees
Computer expenditure
Bad debts
Foreign exchange losses/(gains)
Travelling
Office running
Other costs
Total administration costs
30.6.14
£’000
30.6.13
£’000
20
20
13
13
30.6.14
£’000
1,033
471
29
1,533
30.6.14
£’000
6,850
586
68
36
866
251
480
584
302
67
250
160
559
11,059
30.6.13
£’000
474
376
37
887
30.6.13
£’000
4,794
353
63
38
655
219
323
282
138
(3)
187
153
136
7,338
During the year the Group obtained the following services from the Group’s auditor at costs detailed below:
Fees payable to the Company’s auditor for the audit of Parent
Company and consolidated financial statements
Fees payable to the Company’s auditor for other services:
– The audit of Company subsidiaries
– Non audit fees: All other services
30.6.14
£’000
7
30.6.13
£’000
7
26
3
36
26
5
38
52
dotdigital group plcAnnual Report 2013/2014 Income tax expense
8.
Analysis of the tax charge from continuing operations:
Current tax on profits for the year
Deferred tax on origination and reversal of timing differences
Over provision in previous year
Tax charge from continuing operations
Tax charge from discontinued operations
Current tax on profits for the year
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the standard rate of
corporation tax in the UK of 22.50% (2013: 23.75%)
Effects of:
Expenses not deductible
Research and development enhanced claim
Effect of profits within marginal rate
Expenditure permitted on exercising options
Deferred tax movement
Overseas tax losses
Exceptional item: impairment of goodwill
Capital allowances in excess of depreciation
Total income tax
30.6.14
£’000
166
44
210
(29)
181
181
–
181
30.6.14
£’000
3,600
30.6.13
£’000
231
(11)
220
–
220
220
–
220
30.6.13
£’000
962
810
228
281
(661)
–
(247)
44
25
–
(42)
210
52
(716)
(18)
(45)
–
–
552
167
220
Deferred tax was calculated using the rate 20.75% (2013: 25.5%). There is unused tax carried forward losses of
£125,000 (2013: £117,000), no deferred tax asset has been recognised in respect of these.
9. 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 loss for the financial year was
£363,022 (2013: £2,808,521 – profit).
10. Dividends
Amounts recognised as distributions to equity holders in the period
Final dividend for year end 30 June 2013 of 0.1p per share
Proposed dividend for the year end 30 June 2014 of 0.2p
(2013: 0.1p) per share
30.6.14
£’000
279
566
30.6.13
£’000
–
279
The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has
not been included as a liability in these financial statements.
53
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
11. Earnings per share
Earnings per share data is based on the consolidated profit using and the weighted average number of shares
in issue of the parent company. Basic earnings per share are calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the
conversion of all dilutive potential ordinary shares.
Reconciliations are as follows
From continuing and discontinued operations
Basic EPS
Profit for the year attributable to the owners of the parent
Options and Warrants
Diluted EPS
Profit for the year attributable to the owners of the parent
From continuing operations
Basic EPS
Profit for the year attributable to the owners of the parent
Options and Warrants
Diluted EPS
Profit for the year attributable to the owners of the parent
From continuing operations
Profit for the year attributable to the owners of the parent
Adjustments to exclude loss from discontinued operations
Profit for the year from continuing operations for
the purpose of basic earnings per share excluding
discontinued operations
From discontinued operations
Basic EPS
Diluted EPS
30.06.14
Weighted
average
number of
shares
Earnings
£’000
3,419 279,107,898
11,272,536
–
3,419 290,380,434
30.06.14
Weighted
average
number of
shares
Earnings
£’000
3,460 279,107,898
11,272,536
–
3,460 290,380,434
30.6.14
£’000
3,419
41
3,460
Per share
amount
pence
1.22
–
1.18
Per share
amount
pence
1.24
–
1.19
30.6.13
£’000
742
3,023
3,765
30.6.14
Per share (p)
(0.01)
30.6.13
Per share (p)
(1.10)
(0.01)
(1.10)
There was no difference in the weighted average number of shares used for the calculation of basic and diluted
earnings per share as the effect of all notiently dilutive share outstanding was anti-dilutive.
Weighted average number of shares
Basic EPS
Diluted EPS
Shares
Shares
279,107,898 275,839,565
290,380,434 285,687,852
The denominators and numerators used are the same to those detailed above for both basic and diluted
earnings per share from continuing and discontinued operations.
54
dotdigital group plcAnnual Report 2013/2014
From continuing and discontinued operations
Basic EPS
Profit for the year attributable to the owners of the parent
Diluted EPS
Profit for the year attributable to the owners of the parent
From continuing operations
Basic EPS
Profit for the year attributable to the owners of parent
Diluted EPS
Profit for the year attributable to the owners of parent
Adjusted EPS
Effect of exceptional items:
– Impairment of goodwill
Adjusted earnings
Effect of dilutive shares
Options and Warrants
Adjusted diluted EPS
Adjusted profit for the year
30.06.13
Weighted
average
number of
shares
Earnings
£’000
742 275,839,565
742 285,687,852
30.06.13
Weighted
average
number of
shares
Earnings
£’000
3,765 275,839,565
3,765 285,687,852
2,326
–
3,068 275,839,565
–
9,848,287
Per share
amount
pence
0.27
0.26
Per share
amount
pence
1.36
1.32
–
1.11
–
3,068 285,687,852
1.07
Adjusted earnings per share represents the performance of the company had the exceptional item listed above
not occurred in the year and is only presented for guidance purposes.
12. Goodwill
Group
Cost
At 1 July
And 30 July
Amortisation
At 1 July
Impairment
At 30 June
Net book value
30.6.14
£’000
30.6.13
£’000
4,121
4,121
3,512
–
3,512
609
1,186
2,326
3,512
609
Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual
basis, or more frequently if there are indications that goodwill may be impaired. Goodwill acquired in a business
combination is allocated, at acquisition, to cash generating units (CGUs) that are expected to benefit from that
business combination.
The carrying amount of goodwill relates wholly to the group’s single trading activity and business segment. This
has been tested for impairment during the current financial year by comparison with the recoverable amount of
the CGU.
55
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
12. Goodwill continued
Recoverable amounts for CGUs are based on the higher of value in use and fair value less costs to sell. The
recoverable amounts of the CGUs have been determined from value in use calculations. These calculations use
pre-tax cash flow projection based on financial budgets approved by management covering a five year period.
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and
expected changes in margins. Management estimate discount rates using pre-tax rates that reflect the current
market assessment of the time value of money and the risks specific to the CGUs. Changes in income and
expenditure are based on past experience and expectations of the future changes in the market. The pre-tax
discount rate used to calculate the value in use are 10% (2013 – 10%). The valuations indicate
sufficient headroom such that a reasonably possible change in key assumptions would not result in an
impairment in goodwill.
13. Intangible assets
Group
Cost
At 1 July 2013
Additions
At 30 June 2014
Amortisation
At 1 July 2013
Amortisation for the year
At 30 June 2014
Net book value
At 30 June 2014
Cost
At 1 July 2012
Additions
At 30 June 2013
Amortisation
At 1 July 2012
Amortisation for the year
At 30 June 2013
Net book value
At 30 June 2013
Computer
softwares
£’000
Internally
generated
development
costs
£’000
Domain
names
£’000
211
63
274
155
40
195
79
3,668
1,345
5,013
1,278
824
2,102
2,911
16
–
16
13
2
15
1
Computer
softwares
£’000
Internally
generated
development
costs
£’000
Domain
names
£’000
199
12
211
112
43
155
56
2,328
1,340
3,668
668
610
1,278
2,390
16
–
16
11
2
13
3
Totals
£’000
3,895
1,408
5,303
1,446
866
2,312
2,991
Totals
£’000
2,543
1,352
3,895
791
655
1,446
2,449
Development cost additions represents resources the Group have invested in the development of new innovative
and ground breaking technology products for marketing professionals. This platform allows them to create, send
and automate marketing campaigns. Following development of the products the group intends to licence the
use of the platform.
56
dotdigital group plcAnnual Report 2013/2014 14. Property, plant and equipment
Group
Cost
At 1 July 2013
Additions
Disposals
At 30 June 2014
Depreciation
At 1 July 2013
Depreciation for the year
Eliminated on disposal
At 30 June 2014
Net book value
At 30 June 2014
At 1 July 2013
Cost
At 1 July 2012
Additions
Disposals
At 30 June 2013
Depreciation
At 1 July 2012
Depreciation for the year
Eliminated on disposal
At 30 June 2013
Net book value
At 30 June 2013
15. Investments
Company
Cost
At 1 July
Inter group transfer
And 30 July
Amortisation
At 1 July
Impairment
At 30 June
Net book value
At 30 June
Short
Leasehold
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
107
181
–
288
25
22
–
47
241
82
155
154
(1)
308
64
49
(1)
112
196
91
620
272
(4)
888
321
180
(3)
498
390
299
Short
Leasehold
£’000
Plant and
machinery
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
12
95
–
107
11
14
–
25
82
3
–
(3)
–
2
–
(2)
–
–
192
85
(122)
155
144
42
(122)
64
91
716
112
(208)
620
361
163
(203)
321
299
Totals
£’000
882
607
(5)
1,484
410
251
(4)
657
827
472
Totals
£’000
923
292
(333)
882
518
219
(327)
410
472
Shares in
Group
undertakings
30.6.14
£’000
Shares in
Group
undertakings
30.6.13
£’000
8,705
–
8,705
3,519
–
3,519
8,704
1
8,705
1,193
2,326
3,519
5,186
5,186
57
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
15. Investments
Company
In the previous reporting period the Board took the decision in the year to wind down the operations of
dotAgency Limited resulting in the full impairment of the remaining investment arising from the acquisition
of Netcallidus Limited now known as dotAgency Limited.
The Group or the company’s investments at the balance sheet date in the share capital of companies include the
following:
Subsidiaries
dotmailer Limited
Class of shares:
Ordinary
Ordinary A
dotsurvey (previously known as dotagency) Limited
Class of shares:
Ordinary
dotsearch Europe Limited
Class of shares:
Ordinary
dotcommerce Limited
Class of shares:
Ordinary
doteditor Limited
Class of shares:
Ordinary
dotSEO Limited
Class of shares:
Ordinary
dotagency Limited
Class of shares:
Ordinary, B, C & D
dotmailer Inc
Incorporated: US
Class of shares:
Ordinary
All the above subsidiaries have been included within the consolidated accounts.
58
Proportion of voting
power held %
100.00
100.00
Proportion of voting
power held %
100.00
Proportion of voting
power held %
100.00
Proportion of voting
power held %
100.00
Proportion of voting
power held %
100.00
Proportion of voting
power held %
100.00
Proportion of voting
power held %
100.00
Proportion of voting
power held %
100.00
dotdigital group plcAnnual Report 2013/2014
16. Trade and other receivables
Current:
Trade receivables
Less: Provision for impairment of trade receivables
Trade receivables – net
Other receivables
Amounts owed by Group undertakings
VAT
Prepayments and accrued income
Further details on the above can be found in Note 22.
17. Cash and cash equivalents
Bank accounts
Further details on the above can be found in Note 22.
18. Called up share capital
Allotted, issued, fully paid number
282,782,065 (2013: 277,472,065)
Group
Company
30.6.14
£’000
30.6.13
£’000
30.6.14
£’000
30.6.13
£’000
3,119
(336)
2,783
35
–
–
844
3,662
2,572
(249)
2,323
56
–
–
514
2,893
–
–
–
–
3,821
12
12
3,845
–
–
–
–
5,400
9
14
5,423
Group
Company
30.6.14
£’000
9,306
9,306
30.6.13
£’000
6,072
6,072
30.6.14
£’000
109
109
30.6.13
£’000
70
70
Nominal
value
£0.005
30.6.14
£’000
1,414
1,414
30.6.13
£’000
1,387
1,387
During the reporting period the company undertook the following transactions involving the issuing and
reclassifying issued share capital:
On 28 November 2013 a number of employees exercised their share options increasing the issued share capital
by 840,000 shares.
On 18 December 2013 a number of employees exercised their share options increasing the issued share capital
by 860,000 shares.
On 1 April 2014 a number of employees exercised their share options increasing the issued share capital by
2,190,000 shares
On 2 June 2014 a number of employees exercised their share options increasing the issued share capital by
1,420,000 shares
59
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
Retained
earnings
£’000
9,071
–
(279)
3,419
12,211
Retranslation
reserve
£’000
(2)
–
–
–
(4)
–
(6)
Retained
earnings
£’000
8,202
–
127
742
9,071
Retranslation
reserve
£’000
–
–
–
–
(2)
–
(2)
Share
premium
£’000
4,863
284
–
–
5,147
Other
reserves
£’000
13
–
–
–
–
69
82
Share
premium
£’000
4,755
108
–
–
4,863
Other
reserves
£’000
127
–
(127)
–
–
13
13
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
(4,695)
Totals
£’000
9,250
284
(279)
3,419
(4)
69
12,739
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
(4,695)
Totals
£’000
8,389
108
–
742
(2)
13
9,250
19. Reserves
Group
As at 1 July 2013
Issue of share capital
Dividends
Profit for the year
Balance as at 30 June 2014
As at 1 July 2013
Issue of share capital
Dividends
Profit for the year
Other comprehensive income: Currency translation
Share based payment
Balance as at 30 June 2014
As at 1 July 2012
Issue of share capital
Reclassification of reserves
Profit for the year
Balance as at 30 June 2013
As at 1 July 2012
Issue of share capital
Reclassification of reserves
Profit for the year
Currency translation
Share based payment
Balance as at 30 June 2013
60
dotdigital group plcAnnual Report 2013/2014 Company
As at 1 July 2013
Issue of share capital
Reclassification of reserves
Loss for the year
Share based payment
At 30 June 2014
As at 1 July 2012
Issue of share capital
Reclassification of reserves
Loss for the year
Share based payment
At 30 June 2013
20. Trade and other payables
Current
Trade payables
Amounts owed to group undertakings
Social security and other taxes
Other payables
VAT
Accruals and deferred income
Retained
earnings
£’000
3,065
–
(279)
(363)
–
2,423
Retained
earnings
£’000
129
–
127
2,809
–
3,065
Share
premium
£’000
4,863
284
–
–
–
5,147
Share
premium
£’000
4,755
108
–
–
–
4,863
Share based
payments
£’000
13
–
–
–
69
82
Share based
payments
£’000
127
–
(127)
–
13
13
Totals
£’000
7,941
284
(279)
(363)
69
7,652
Totals
£’000
5,011
108
–
2,809
13
7,941
Group
Company
30.6.14
£’000
30.6.13
£’000
30.6.14
£’000
30.6.13
£’000
819
–
549
391
559
666
2,984
367
–
369
171
504
270
1,681
2
–
–
12
–
60
74
22
1,298
–
–
–
31
1,351
Further details on liquidity and interest rate risk can be found in Note 22.
61
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
21. 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
£’000
311
2,147
2,458
Land and
Buildings
£’000
312
806
1,118
30.06.14
Others
£’000
34
19
53
30.06.13
Others
£’000
21
12
33
Totals
£’000
345
2,166
2,511
Totals
£’000
333
818
1,151
Operating leases represent rental payable by the Group for its office properties. Leases are negotiated for an
average term of five years and rentals are fixed on average of two years with an option to extend for a further five
years at the prevailing market rate at the time.
22. Financial instruments and risk management
The Group’s activities expose it to a number of financial risks that include credit risk, liquidity risk, currency risk
and interest rate risk. These risks, and the Group’s policies for managing them have been applied consistently
throughout the year and are set out below.
The Group hold no financial or non other financial instruments other than those utilised in the working operations
of the Group and that listed in this note. It is the Group’s policy not to trade in derivative contracts.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• Trade receivables
• Cash and cash equivalents
• Trade and other payables
Financial instruments by category
The following table sets out the financial instruments as at the reporting date:
Financial assets
Trade and other receivables
Bank balances
Financial liabilities
Trade payables
Accrued liabilities and other payables
Group
Company
30.6.14
£’000
30.6.13
£’00
30.6.14
£’000
30.6.13
£’00
3,662
9,306
12,968
819
2,165
2,984
2,893
6,072
8,965
367
1,314
1,681
24
109
133
2
72
74
23
70
93
22
31
53
The fair value of the Financial assets and Financial liabilities equal to their carrying values. All financial assets
are categorised as loans and receivables and all financial liabilities are categorised as financial liabilities at
amortised cost.
62
dotdigital group plcAnnual Report 2013/2014 General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and
policies whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating
processes that ensure the effective implementation of the objectives and policies to the Group’s risk committee.
The Board receives monthly reports from the Risk Committee through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly
affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below;
Interest rate risk
The Group’s interest rate risk arises from interest bearing assets and liabilities. The Group has in place a policy
of maximising finance income by ensuring that cash balances earn a market rate of interest; offsetting where
possible, cash balances and by forecasting and financing its working capital requirements. As at the reporting
date the Group was not exposed to any movement in interest rates as it has not external borrowings and
therefore not exposed to interest rate risk. No sensitivity analysis has been prepared.
The Group’s working capital requirements are managed through regular monitoring of the overall cash position
and regularly updated cash flow forecasts to ensure there are sufficient funds available for its operations.
Liquidity risk
The Group’s working capital requirements are managed through regular monitoring of the overall position
and regularly updated cash flow forecasts to ensure there are funds available for its operations. Management
forecasts indicate no new borrowing facilities will be required in the upcoming financial period.
Trade and other payables of £1,876,000 (2013: £808,000) are expected to mature in less than a year.
Credit risk
Credit risk arises principally from the Group’s trade receivables, as there are no trade receivables within the
company, which comprise amounts due from customers. Prior to accepting new customers a credit check is
obtained. As at 30 June 2014 there were no significant debts pass their due period which had not been provided
for. The maturity of the Group’s trade receivables is as follows:
0-30 days
30-60 days
More than 60 days
The maturity of the Group’s provision for impairment is as follows:
0-30 days
30-60 days
More than 60 days
The movement in the provision for the impairment is as follows:
As at 1 July 2013
Provision for impairment
Receivable written off in the year
Unused amount reversed
As at 30 June 2014
30.6.14
£’000
1,817
702
600
3,119
30.6.14
£’000
–
82
253
336
30.6.14
£’000
249
300
(163)
(50)
336
30.6.13
£’000
1,808
65
699
2,572
30.6.13
£’000
3
23
223
249
30.6.13
£’000
211
148
(110)
–
249
63
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
22. Financial instruments and risk management
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 older then the average collection period consisted of
a value of £678,260 of which £336,242 was provided for. The Group felt that the remainder would be collected
post year end as they were 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. The majority of the company’s cash holdings are held at NatWest Bank who has
an A credit rating.
The carrying value of both financial assets and liabilities approximates to fair value.
Capital policy
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in
order to provide optimal returns for shareholders and to maintain an efficient capital structure to reduce the
cost of capital.
In doing so, the Group’s strategy is to maintain a capital structure commensurate with a strong credit rating
and to retain appropriate levels of liquidity headroom to ensure financial stability and flexibility. To achieve this,
the Group monitors key credit metrics, risk and fixed charge cover to maintain this position. In addition the
Group ensures a combination of appropriate short-term and long-term liquidity headroom.
During the year the Group had a short-term loan balance of £nil (2013: £nil) 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 a further long-term investments or acquisitions and therefore to maintain
or re-align the capital structure, the Group may adjust when dividends are paid to shareholders, return capital
to shareholders, issue new shares or borrow from lenders.
23. Deferred tax
As at 1 July
Current year provision
Release of provision
30.6.14
£’000
14
44
–
58
30.6.13
£’000
25
–
(11)
14
The above is comprised of temporary differences in respect of capital allowances in excess of depreciation
amounting to £58,000, temporary differences in respect of development costs amounting to £600,000 and a
deferred tax asset of £600,000 in respect of share options.
24. Capital commitments
The Company and Group had capital committed of £191,000 at the year end towards the fit out of the new
London Bridge office.
25. Related party disclosures
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated
on consolidation and are not disclosed in this note.
64
dotdigital group plcAnnual Report 2013/2014 Group
The following transactions were carried out with related parties.
Sale of services
Cadence
performance
Entity under common
directorship
Email marketing
services
30.6.14
£’000
2
30.6.13
£’000
1
2
1
Sales of services are based on the price lists in force and at terms that would be available to third parties.
Purchase of services
F-Beechinor-Collins*
Barratts of Old Ltd
Entity under common
directorship
Entity under common
directorship
Consultancy
services
Consultancy
services
* Consultancy services to assist with the international expansion and development of channel sales strategy.
30.6.14
£’000
–
41
41
30.6.13
£’000
6
12
18
Key management compensation
Key management include Directors and the Company Secretary. The compensation paid for key management
for employee services are shown below.
Remuneration and other short-term employee benefits
Share-based payment
Pension cost
Directors
Aggregate emoluments
Company contributions to money purchase pension scheme
Share based payment
Information in relation to the highest paid Director is as follows:
Salaries
Other benefits
Pension costs
The highest paid director did not exercise any share options.
Company
The following transactions were carried out with related parties.
Year end balances arising from sales/purchase of services
dotmailer Limited
dotagency Limited
Subsidiary
Subsidiary
Payables
Receivables
30.6.14
£’000
966
15
42
1,023
30.6.13
£’000
893
–
38
931
30.6.14
£’000
877
42
5
924
30.6.14
£’000
230
7
14
251
30.6.13
£’000
601
35
–
636
30.6.13
£’000
170
7
11
188
30.6.14
£’000
(1,864)
9
(1,855)
30.6.13
£’000
(1,303)
9
(1,294)
The receivables and payables are unrestricted in nature and bear no interest.
No provisions are held against receivables from related parties.
65
dotdigital group plcAnnual Report 2013/2014Financial statements Notes to the consolidated financial statements continued
For the year ended 30 June 2014
Loans to related parties
Subsidiary
dotmailer Limited
As at 1 July
Loans advanced
Loans repaid
30.6.14
£’000
30.6.13
£’000
5,400
324
(43)
5,681
–
5,400
–
5,400
Key management compensation
Key management are Non-Executive Directors. The compensation paid for key management for employee
services are shown below.
Remuneration and other short-term employee benefits
Directors
Aggregate emoluments
30.6.14
£’000
95
95
30.6.13
£’000
88
88
30.6.14
£’000
95
95
30.6.13
£’000
88
88
26. Ultimate controlling party
There is no ultimate controlling party of the Group. dotdigital group plc acts as the Parent Company to dotmailer
Limited, dotagency Limited, dotsearch Europe Limited, dotmailer Inc, dotsurvey Limited (Dormant), dotseo
Limited (Dormant), dotcommerce Limited (Dormant) and doteditor Limited (Dormant).
27. Share-based payment transactions
The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted
after 7 November 2002. The expense recognised for share based payment made during the year is £69,469
(2013: £13,190)
Vesting conditions of the options dictate that employees must remain in the employment of the Group for the
whole period to qualify.
Movement in issued share options during the year
The table illustrates the number and weighted average exercise price (WAEP) of, and movements in share
options during the period. The options outstanding at 30 June 2014 had a WAEP of 8.63p (2013: 6.34p),
a weighted average contracted life of 2.8 years and their exercise prices ranged from
1p to 18.25p. All share options are settled in form of equity issued.
Financial assets
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
30.06.14
No of options
WAEP
30.6.13
No of options
16,117,930
3,655,860
540,000
5,310,000
13,923,790
9,517,930
7.54p
18.25p
12.57p
5.86p
8.82p
4.09p
17,909,930
1,500,000
1,182,222
2,109,778
16,117,930
14,867,930
WAEP
7.25p
13.00p
8.36p
5.61p
7.54p
5.94p
The weighted average share price at the date of the exercise for share options exercised during the period was
30.58p (2013: 14.56p)
66
dotdigital group plcAnnual Report 2013/2014 The inputs into the Black-Scholes model are as follows:
Number of options granted
Share price at grant date
Exercise price
Option life in years
Risk free rate
Expected volatility
Expected dividend yield
Fair value of option/warrant
18 October
2013
3,554,794
17.82p
18.25p
5 years
1.40%
30%
0.4%
3.81p
9 November
2012
1,500,000
12.95p
13.00p
6 years
2.05%
30%
0%
2.72p
Expected volatility was determined by calculating the historical volatility of the Group’s share price from the date
it listed to the grant date of the share option. The expected life used in the model is based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
28. Group reconciliation of profit before corporation tax to cash generated from operations
Current
Profit before tax from all operations
Currency revaluation
Exceptional item: Impairment of goodwill
Depreciation
Loss on disposal of fixed assets
Share based payments
Finance income
Decrease/(increase) in trade receivables
Increase/(decrease) in trade payables
Cash generated from operations
Group
Company
30.6.14
£’000
30.6.13
£’00
30.6.14
£’000
30.6.13
£’00
3,600
(4)
–
1,117
1
69
(20)
4,763
(769)
1,303
5,297
962
(2)
2,326
831
50
13
(13)
4,167
(696)
346
3,817
(363)
–
–
–
–
69
–
(294)
1,578
(1,277)
7
2,809
–
2,326
–
–
13
–
5,148
(5,410)
(11)
(273)
29. Group cash and cash equivalents
The amounts disclosed on the statement of cash flow in respect of cash and cash equivalents are in respect of
these statements of financial position amounts:
As at 1 July 2012
As at 31 July 2013
As at 30 June 2014
Net cash flows from discontinued operations
Net cash generated from operating activities
Net cash generated from investing activities
Net cash used in financing activities
Group
£’000
4,021
6,072
9,306
30.06.14
£’000
(95)
–
–
Company
£’000
83
70
109
30.06.13
£’000
(148)
1
–
30. Project development
During the period the Group incurred £1,344,414 (2013: £1,339,730) in development investments. All
resources utilised in development has been capitalised as outline in the accounting policy governing this area.
31. Post balance sheet events
There are no post balance sheet events which impact the Group’s financial statements.
67
dotdigital group plcAnnual Report 2013/2014Financial statements Company information
For the year ended 30 June 2014
Directors
S Bird
P A Simmonds
I Taylor
R Kellett-Clarke
F Beechinor-Collins
S J Barratt
M Patel
Secretary
M Patel
Registered office
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
Registered number
06289659 (England and Wales)
Auditors:
Jeffreys Henry LLP
Statutory auditor
Finsgate 5-7 Cranwood Street
London
EC1V 9EE
Nomad/Broker
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
Joint Broker
Finncap
60 New Broad Street
London
EC2m 1JJ
Solicitors
BPE Solicitors LLP
St James House
St James Square
Cheltenham
Gl50 3PR
68
dotdigital group plcAnnual Report 2013/2014