Annual Report
2015/2016
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dotdigital Group PlcAnnual Report 2015/2016 Contents
1 Key highlights
2 Chairman’s statement
Strategic report
4 The dotmailer platform
5 A growing global business
6 Positive customer journeys
8 Growth strategy
10 Sector experience: Travel and leisure
12 Our culture
14 Key performance indicators
16 Risks, mitigations and impact
18 Sector experience: Ecommerce
20 Chief Executive Officer’s report
26 Sector experience: Finance and insurance
28 Corporate social responsibility report
Governance
30 Board of Directors
32 Corporate governance report
33 Audit Committee report
34 Remuneration Committee report
36 Report of the Directors
38 Report of the independent auditor
Financial statements
40 Consolidated income statement
40 Consolidated statement of comprehensive income
41 Consolidated statement of financial position
42 Company statement of financial position
43 Consolidated statement of changes in equity
44 Company statement of changes in equity
45 Consolidated statement of cash flows
45 Company statement of cash flows
46 Notes to the consolidated financial statements
68 Company information
Key highlights
Group revenues up 26%
(from £21.4m to £26.9m)
EBITDA increase by 17% to £8.0m
Net cash generated from
operating activities of £7.7m
Strong cash position of £17.3m
as at 30 June 2016
Corporate statement
dotmailer is the email marketing platform
of the dotdigital Group Plc (LSE: DOTD).
The software enables more than 80,000
marketers in 150 countries to use advanced
contact data to design, test and send
powerful automated campaigns.
We understand what marketers need from a
technology platform by providing easy-to-use
tools that enable them to start small, act fast
and scale quickly. Supported by world-class
strategic, creative and managed services, we
make it easy for our customers to achieve
dramatic results that grow their business.
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Chairman’s
statement
Frank Beechinor-Collins
Non-Executive Chairman
Activity on our platform continues
to increase and customers sent
8.6 billion emails in 2015/16,
up 50% since the previous year.
dotdigital Group Plc has had a successful
In Autumn 2015, Rohan Lock, previously Head
Our policy on acquisitions continues as
Milan Patel will continue as CFO until we
I would like to take opportunity thank the team
2015/16 financial year. The Group returned
of Sales in the UK, moved back to his native
previously: our main focus is on organic growth
appoint a new candidate for that role. A search
at dotdigital for their fantastic contribution to
a profit before tax of £6.2m and EBITDA
Australia to head up our operations there.
but we will consider acquisition opportunities,
process is currently underway and in the interim
yet another successful year. I would like to say
was slightly ahead of market expectations.
Progress has been rather slower than we had
should they arise, and only if they allow us to
Milan is supported by George Kasparian (Non
a special thank you to Milan for ‘stepping up
We continue to be cash generative and
planned as some of the major partners we
accelerate growth in a market or provide us
Board Finance Director), Tink Taylor and Peter
to the plate’ during Simone’s illness and for
ended up with cash reserves of £17.3m,
signed have taken slightly longer to deliver their
with a technical advantage.
Simmonds, who has committed extra days in
his continued hard work as he settles into the
up from £11.9m at the end of the last
first business. Some of these partners operate
the business until the new appointment is made.
role of CEO.
financial year.
across the Asia Pacific market and will be of
In December 2015 we received devastating
great assistance as we build our customer
news that Simone Barratt required surgery.
Following the announcement of Brexit on
Notwithstanding any unforeseen economic
We continue to make good progress with how
base across the region.
we engage with customers and this past year
She stepped away from the business to focus
on her treatment and Milan Patel was appointed
has seen another rise in customer average
dotdigital Group Plc already has customers
interim CEO.
monthly spend, an increase of 29% on the
in the Middle East and we plan to continue to
24 June we have assessed the impact of the
impact of Brexit and the forthcoming US
vote to leave the EU. Our initial view is that the
elections, the outlook for the dotdigital Group
outcome, thus far, has not had any immediate
Plc business over the coming years continues
effect on our business.
to be very promising. We will continue to look
prior year. Activity on our platform continues to
build this market. During the second half of this
Thankfully Simone’s treatment went well but
for business with interesting opportunities
increase and customers sent 8.6 billion emails
financial year we have also started to market
on 20 July 2016 we announced that she was
Email marketing continues to offer the best
both in the UK and in overseas markets. We
in 2015/16, up 50% since the previous year.
to potential clients in the Nordic and Benelux
not returning to the business in her role as
value and marketing return on investment. In
plan to continue to grow our business in new
By evolving our range of enhanced product
regions and we have had some good success.
CEO and she was also stepping down from
addition, the fact we are continuing to grow our
geographies both through direct sales and
features, which are sold on a recurring model,
the Board. We also announced at that time
business outside the UK will also help mitigate
using our strategic partners. Under Milan’s
we grew this part of our business by 106% and
Our services business has continued to grow
that Milan was appointed as the new permanent
against any slowdown in UK economy resulting
stewardship and a strong operating Board
this past year it accounted for £4m of sales.
in the past year, achieving 11% growth on
CEO. I would like to take this opportunity to
from leaving the EU. The Board will keep the
I have every confidence we will continue to
the previous year with healthy margins. We
thank Simone for her time in the business,
impact of Brexit under review.
grow our business and look forward to another
Our overseas business has continued to grow
have continued to invest considerably in our
initially as a Non-Executive Director and laterally
and revenue outside the UK has increased by
infrastructure ensuring that the business has
as CEO, and wish her well as she returns
58%. In January 2016 we appointed Dan Morris
the ability to offer the service expected by our
to full health.
successful year ahead.
The support from
dotmailer is exceptional
and the team shows
a genuine interest in
understanding us as
a business. If you’re
looking for powerful yet
easily accessible email
software, with gold
medal account support,
then look no further.
Marcus Forsey, Alexandra
to head up our US operation and in June we
customers as our business expands in both the
moved out of a shared office into a permanent
volume of emails we send and the geographical
location in New York. Our US region revenues
markets in which we operate. To this end we
grew by 43% from US$3.0m to US$4.3m in
moved our platform to the cloud in America
this past year with particular focus on channel
and Europe with Australia going live early 2017.
partner and Magento sales.
Frank Beechinor-Collins
Non-Executive Chairman
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Strategic report
The dotmailer platform
A growing global business
As the benefits of dotmailer come to the
fore around the world, the demand for our
product is growing in new territories. In
2016/17, we’re expanding our reach into
additional regions such as Benelux, the
Middle East, The Nordics and South Africa.
In July 2015 we opened a new base in Australia, enabling us to grow
our presence in the Asia Pacific region. We now have offices in key
time zones around the world, with more than 200 employees spread
across the UK, the US, Belarus and Australia.
Not only do we have a total of six offices in North America, the UK and
Australia, we also have a growing partner network servicing customers
in every corner of the world.
Our platform works perfectly in
these languages:
French
German
Italian
Dutch
Spanish
Portuguese
Russian
English
The software also supports the alphabetic
characters of:
Arabic Thai
I M A G I N AT I O N . . . D E L I V E R E D
An email marketing automation platform
for digital marketers.
Continuing growth
The flagship product, dotmailer, is a powerful
Increased scalability
World-class integrations
dotmailer is a well-established product and
The Company also has specialist and
email and multi-channel marketing automation
over the past eight years we have seen strong
deep pre-built integrations with best-in-
platform with easy-to-use tools that enable
evidence of the scalability of the Group’s
class ecommmerce platforms and CRM
marketers to efficiently create, manage, execute
platform with monthly sends volumes growing
products such as Magento, Salesforce
and evaluate effective targeted campaigns.
from under 5m sends per month to currently
and Microsoft Dynamics CRM.
over 800m per month.
In addition to its automation technologies,
In addition the platform has been designed to
the Group also provides expert multi-channel
The Group has carried out significant
integrate easily with clients’ existing marketing
marketing consultancy and services for
development work on the dotmailer platform
technology and systems.
businesses seeking to maximise customer
over the years, providing continuous innovation
acquisition, conversion and retention. The
and functionality to its users.
dotmailer has a broad customer base, with the
Group is headquartered in London and
five largest clients accounting for approximately
employed 220 staff at the end of June 2016.
This includes a highly compelling visual drag
3% of total revenues (the top 20 clients account
and drop email template design, drag and drop
for less than 8% of total revenue).
Email continues to be the top-performing digital
segmentation and query builder, drag and drop
channel as confirmed in eConsultancy’s 2015
campaign automation, translation of the user
Email Marketing Industry Census, with 68%
interface into eight languages and responsive
rating the channel as Excellent or Good.
template toolkits that optimise display content
This finding was echoed in the UK Direct
and layout on mobile devices (smartphones
Marketing Association report which shows the
and tablets). Our platform’s ease of use, ease
average ROI for email campaigns has actually
of integration and innovation combine to allow
risen 53% to £38 for every £1 spent in 2015.
customers of all sizes and abilities to join us,
and grow with us.
We now have in-region data processing and
To some extent, this reflects some of the
storage for the North America and Europe
Group’s historical success in the SME space
regions with Australia to go live early next year.
but, increasingly, the Group is gaining solid
traction in the SME market in the UK, US and
Asia Pacific.
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Strategic report
Positive customer journeys
Consumer expectations are continually rising and
so are the number of available marketing channels.
It’s never been more essential for companies to
communicate intelligently with consumers throughout
their journey with the brand, and email is the channel
that enables them to keep up with customers’ demands.
From an initial welcome message right through to the loyalty campaign which keeps customers
coming back for more, email is the glue that binds together the customer experience of today.
It’s cost-effective, scalable and delivers ROI like no other marketing channel can. And with our
easy-to-use personalisation tools, our customers can make all of their contacts feel like the email
was meant for them.
Awareness
Welcome emails are an invaluable
opportunity for brands to introduce
prospects to their key USPs and
differentiate themselves from the
competition.
Purchase
Here, marketers can use email
to deliver automated thank you
messages, as well as transactional
emails such as confirmation and
delivery notification.
Email marketing is an important part of our
ecommerce strategy, because as we begin to look
at customer experience, it gives us the opportunity
to talk to our customers on a one-to-one basis.
Jonny Stewart, ELEMIS
Advocacy
Companies who’ve done a good job
of satisfying the customer can use
email to gain the testimonials and
social proof that are so important in
people’s purchasing decisions.
These creative examples
are indicative of emails our
customers send to build
positive customer journeys.
Research
During this stage, prospects are
learning about their problem and
the variety of solutions available.
Automated abandoned browse and
cart follow-up emails act as helpful
reminders, driving prospects back to
the site to convert.
Retention
Keeping customers engaged is an
important factor for any company. So
whether it’s promoting a competition,
introducing a loyalty programme or
sending newsletters, retention emails
can do just that.
Replenishment
and renewals
Companies that sell a replenishable
product or renewable service can
encourage repeat purchases with
well-timed reminder emails.
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Strategic report
Our growth strategy
Enhancing shareholder value by focusing on profitable growth
and product innovation.
Our shareholder base expects a low-risk approach to investment.
Over the past eight years as a public company we have a good track
record of testing, learning and then investing in growth opportunities.
As the Company has grown we have also taken care to protect our core
customer base whilst looking to deliver strong top-line growth through:
1
Geographic expansion
2
Product innovation
3
Strategic partnerships
As an international
brand, dotmailer allows
us to handle multiple
languages. We’re
operating in seven
countries currently and
this is going to expand
over the coming years.
Doug Taylor, Slendertone
Our revenues from outside the UK have grown from 3% in
In 2015/2016 we delivered a number of significant new product
In 2015/2016 we continued to build on our existing partner
2012/2013, to 10% in 2013/2014, to 14% in 2014/2015 and
features including, advanced personalisation, lead scoring, fully
relationships in ecommerce and CRM by focusing on our specialist
now to 18% in 2015/16. We expect this % to increase through
personalised landing pages and substantial enhancements to our
connectors for Magento, MS Dynamics CRM and Salesforce.
2016/2017 with the bulk of these overseas revenues coming from
market-leading integrations with Magento, Microsoft Dynamics
In the year Magento also named dotmailer as their only global
the US, Nordics, Benelux, Middle East, South Africa and Asia
CRM and Salesforce. From a revenue perspective we saw an
Premier partner for marketing automation.
Pacific as we start to focus our sales and marketing in
increase in recurring revenues from technology of 106% especially
these regions.
our marketing automation functionality.
2016/2017 we plan to focus on developing a robust global
reseller network, whilst our direct sales team continues to grow
Our choice of strategic partners has been influenced by
Going forward, in support of our international and partner growth
our organic direct business. Additionally, we are excited about
their geographic footprint to enable us to further penetrate
strategy we will continue to globalise our product suite and our
early progress in developing key strategic partnerships that will
other regions.
infrastructure. In addition, we have identified the following themes
drive our presence globally.
for our roadmap: platform extensibility, single customer view, real-
time customer experience, predictive capabilities, ecommerce,
email innovation, social and mobile. In 2016/17 we will also add
more connectors into both the ecommerce and CRM space.
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Sector experience
Travel and leisure
As the travel and leisure industry continues to flex
around shifting consumer shopping habits and emerging
technologies, companies are using email as an essential
component to deliver exceptional customer experiences.
I use email to cement customer
relationships and loyalty.
Ian Jennings, Managing Director,
Explorer Travel Insurance
TUI is the largest leisure, travel and tourism company in the world,
Explorer Travel Insurance is an online specialist, with 80% of
covering nearly 80 tour operators and operating from 18 countries.
its new sales coming through digital channels. The insurance
marketplace is particularly competitive – so the company’s challenge
The TUI Group went through a successful three-year programme
is to keep prices and costs down, while also developing customer
to integrate email, CRM, web and sales reporting. This project has
relationships to foster repeat business.
not only given the company a common platform and a massively
increased ability to send out effective communications, it has also
One aspect of providing memorable customer service is maintaining
helped TUI to understand its market better.
high-quality communications. “I wanted to use email to cement
Manual tasks like data imports were extremely labour-intensive
effort than just banging out reminders that a policy is due to expire”
for the team at the TUI Group, as Matt Royal, the company’s CRM
said Ian Jennings, Managing Director.
customer relationships and loyalty, which meant putting in a lot more
Manager, explains, “Before we implemented dotmailer, it could
take as long as two days to extract addresses for segmenting
For the team at Explorer, email isn’t just a tool to push its products;
campaigns, import the data, create a pretty basic email and send
it’s a way to keep the brand front of mind by providing useful,
it out. This was a major pain point, so when we were showed that
interesting content throughout the year. “We use email creatively
dotmailer could complete the same task in a few minutes, the
– so we provide a mix of background content, like competitions,
decision to migrate became a no-brainer.”
and special offers that will just remind them we’re here and maybe
trigger a response when they need cover.”
Our travel and leisure sector client base is growing with a wide spectrum of companies, including airlines,
specialist travel insurers, holiday extras providers and package holiday firms.
dotmailer cut data imports down
from two days to a few minutes.
Matt Royal, CRM Manager, TUI Group
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Strategic report
Our culture
The dotmailer platform is built to be flexible
and easy to work with. As a Company, we
like to think we’re the same. We continue to
invest in the development of our people and
other initiatives that build upon the great
culture that is at the heart of our business.
Everyone at dotmailer
is knowledgeable and
helpful, making it a
great place to work.
Louisa Smith, HR Assistant
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dotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Revenue performance which
grew organically by 26%
was driven by strong growth
from both the UK and the
international markets.
Milan Patel, Chief Executive Officer, dotdigitial Group Plc
Strategic report
Key performance indicators
We use our key performance indicators (KPIs) 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 KPIs.
Financial
Revenue
We aim to deliver
double-digit organic
revenue growth from
continuing operation.
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Cash position
We aim to have a
strong cash position.
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EBITDA
We aim to have a positive earnings
before interest, tax, depreciation and
amortisation (EBITDA) growth.
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Strategic
Emails sent
We aim to keep
increasing the volume
of emails sent through
the system.
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Recurring revenue
International growth
We aim to have recurring
revenues of over 70%.
We aim to expand
revenue from outside
of the UK.
78%
76%
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18%
14%
10%
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Strategic report
Risks, mitigations and impact
Risk area
Impact
Mitigation of risk
Risk area
Impact
Mitigation of risk
Utilisation of
cloud service
providers
Supplier,
computer
hardware
and internet
reliability-related
risks
Information
Security & Cyber
Risks
Data privacy
Internet service
providers (ISPs)
reputation and
internet browser,
related risks
A key strategy implemented by the Group was to
migrate the dotmailer platform to a hybrid cloud
infrastructure, utilising cloud service providers to host
the web application functions of the platform. An event
resulting in multiple cloud data centre failing, for any
significant period of time or the termination of services
by one of these cloud providers for any reason may
result in a significant loss of revenues and therefore
materially harm the Group’s business, operating results
and financial condition. The nature of cloud computing
also means that a majority of the dotmailer platform will
sit on shared infrastructure that is more of a target for
cyber-attacks.
An event resulting in a loss of a data centre that hosts
the send components of the platform for a prolonged
period of time will result in sub-optimal service for
customers that may lead to a loss in revenues.
Also events preventing or obstructing the platform
from communicating over the internet, such as the
blacklisting of IP addresses at major internet service
providers, may result in a loss of revenues.
The ever evolving, sophisticated nature of the cyber
threat landscape poses an ongoing risk to the group.
Revenue is dependent on the availability of computer
systems, and as such, an attack against the groups
networks could have a significant impact on its ability
to function properly. A successful attack impacting the
Confidentiality, Integrity, or Availability of systems and
data would have a negative impact on the Group’s
reputation and therefore its ability to retain and attract
new clients.
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.
As a large proportion of the Group’s revenue is derived
by charging a price per email for sending marketing
emails on behalf of customers, the impact of not
being able to deliver these or deliver these without
engagement tracking for any reason is significant.
If internet browsers detect hyperlinks as a phishing
threat, if abuse complaints from providers are not dealt
with properly, if bad customer data generates multiple
complaints through ISPs or third party spam blacklists,
these impact the platform’s overall ability to effectively
deliver email.
Best of breed Cloud computing providers were chosen by the Group to deliver the
services (Microsoft Azure and Amazon AWS) and the dotmailer platform has been
architected to be able to recover in the event of a single data region failure within an
acceptable recovery time.
By utilising cloud service providers, economies of scale are inherited from the provider
in terms of computing power, bandwidth, and security technologies, mitigating other
corporate risks.
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.
A dedicated Information Security function exists to manage the security program
across the business. Regular vulnerability scanning, penetration testing, and security
update schedules are in place to proactively detect and remediate against the latest
threats, and policies and procedures are in place to detect and respond to incidents.
The recent migration of the core dotmailer platform to Microsoft Azure has enabled
the Group to take advantage of additional security features to help further protect
against attacks, and the Group continues to invest further in people, processes,
and technology to further reduce exposure in this area.
The Group operates an open door policy whereby it shares its policies relating to
security, compliance and data privacy. dotmailer has a public-facing Trust Centre
where customers and prospects can view this information online. Its features
also assist customers to be compliant with current legislation and in most cases
automates these compliance processes. The Group’s staff research the impact
of new legislation to its customers (and in some cases are actively involved
in the creation of the legislation & industry best practise) and publish related
communications including white papers and blogs. Its executive actively contributes
to the digital marketing space to advocate best practice and make sure its customers’
needs are represented.
dotmailer provides a number of services as part of the core product to filter known
or bad data that may not comply with EU, Asia Pacific or US anti-spam regulations.
Continued investment in reputation & security related product development with
the addition of more third party data feeds to filter bad data continues to reduce the
risk. Through its admittance to various industry groups, such as the Email Sender
and Provider Coalition (ESPC), the Group has demonstrated its commitment to
implementing industry best practice in anti-abuse. dotmailer holds a board of
directors’ role at the Email Sender and Provider Coalition, who’s membership includes
Google, Microsoft, Yahoo!, Comcast and AOL among other global email inbox
providers. It also provides a number of consultancy services to its customers to better
improve their email delivery, data quality and compliance with privacy and anti-spam
legislation. Through its expansion of its deliverability team, the Group continues
to work closely with ISPs, email receivers and third party anti-abuse vendors by
proactively dealing with abuse complaints generated by customer emails. Whilst
dotmailer acts as the data processor on behalf of its customers, and is not directly
liable for breach of the EU, Asia Pacific or US anti-spam regulations, it does take
these breaches seriously, suspending or terminating customer service agreements
if necessary.
Competitive
environment
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.
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.
Several established Enterprise ESPs now form the foundation of various “Marketing
Clouds” – IBM Marketing Cloud (Silverpop), Oracle Marketing Cloud (Responsys,
Eloqua), Salesforce Marketing Cloud (ExactTarget, Pardot), and Adobe Marketing
Cloud (Neolane). These platforms have the broadest product offerings, including
tools to coordinate marketing campaigns across digital channels, although tend
to innovate through acquisition and do not react quickly to market changes.
Another competitor, Campaign Monitor, has stated in September that they shall
create 100 new positions in the UK over the next two years, with a new London office
to support its European activities, stating that they have 25, based within the UK.
We therefore expect to see increasing competition from this vendor, which have a
business model historically based on both agency partnerships and direct sales.
We increasingly see a mix of competition and opportunity with Mailchimp at the
smaller business end, with some prospective customers looking for their next step
in email platform by choosing dotmailer and others with adopting Mailchimp due to
the simplicity of their needs and the lower price points.
International
expansion
Investment in
growing high
performance
teams
As the business expands into new geographic
territories there is a risk that policies, processes 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.
The Group will place an emphasis on hiring senior people with experience of
developing successful international business models, whilst hiring quality local people
in important International territories. The Group will also utilise the services of expert
advisers as and when necessary. Management information, business intelligence,
audits and risk appraisals will be updated and monitored to ensure they reflect the
International nature of the business.
Failure to attract, hire, develop & retain individuals who
positively contribute to our high performing teams is
critical to the support of achieving our corporate goals.
In addition to the continual investment made in acquiring additional talent, both in
the UK and Internationally, we are focussed on the delivery of a comprehensive
programme of formal and informal learning and development opportunities that are
aligned to the needs and goals of the business.
Development and
maintenance of
products
There is a possible risk that without continued
investment into new products, enhancement of old
products and into new sectors the growth of the
Group will be impaired.
As new products are developed, and the technology
landscape changes, the maintenance burden of
existing products increases and without continued
investment maintaining those products they
may become unusable and could affect the
Group’s revenue.
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.
Evolving
technology
and customer
requirements
Investment into the Group’s product offerings continues to enable good growth.
Innovation and increased development of new core product offerings in the marketing
automations space has opened up more revenue opportunities and increased the average
recurring revenue of the Group’s existing customers. Ease of use of the dotmailer offerings
and the ability to offer flexibility to integrate and connect to best-of-breed products
continue to enable the Group’s customers to grow at their pace without constraints. The
Group constantly reviews individual product performance and the technology landscape
and makes decisions to optimise its product portfolio if necessary to reduce maintenance
overheads. A focus for the coming year is to continue to develop new features and
connectors that allow our customers to more easily interact with their customer data and
to further enhance our proposition to the ecommerce and CRM sector, which will allow
the dotmailer platform to compete even more favourably in this growing market.
Investment in development of new solutions, partnerships with best-of breed third parties
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. The Group has not aligned itself to a
single vertical, neither B2B nor B2C, and this strategy is purposeful for risk reduction.
Where competitors introduce new solutions generally targeted at verticals, the breadth of
the dotmailer platform, providing solutions across sectors, still differentiates dotmailer from
its competitors. It delights customers, enabling them to grow and adapt without the need
to change their marketing platform. This in conjunction with, a continued emphasis in
recruiting and retaining expert technical and marketing professionals, has enabled
the Group to innovate within its sector. We are continuing to see email marketing and
marketing automation as key drivers in the buying decision and combining these
capabilities with the market driven need for leveraging data to drive decisions and
personalisation remains a key focus for the Group.
16
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Ecommerce
We have a huge client portfolio of ecommerce brands,
particularly because of our Premier Technology
Partnership with leading ecommerce platform Magento.
From fashion and lifestyle retailers to beauty and B2B
ecommerce, we work with the likes of Barbour, Fred Perry,
ELEMIS, Science in Sport, Slendertone and Dormify.
Slendertone is a world leader in providing products that improve
Dormify breaks the rules of traditional dorm decor with a fashion-
muscle tone and body shape. It was the first company to produce
forward approach to styling small spaces. It creates and curates
an Electro-Muscle Stimulation toning belt cleared for market by the
exclusive products specifically designed for fashion-minded
US Food and Drug Administration (FDA), and has gone on to sell
college girls, merchandising them into easy-to-shop looks to
over 6.1m products worldwide.
make decorating stress-free and fun.
With the explosion in the popularity of wearable devices,
The dotmailer for Magento connector has empowered Dormify’s
Slendertone wanted to develop a clever way to keep customers
small yet savvy team to find clever ways to engage its customers
engaged after the purchase. This led to the creation of the brand’s
and deliver the personalised, relevant experience they expect.
app-driven Connect Abs product. Each user takes a unique path
with the product and, as such, the brand has developed a number
Automated campaigns and triggered programmes, which leverage
of re-engagement programmes to help those who’ve gone
everything from behavioural to transactional data, have been a
off track.
winner for Dormify. Triggered emails now account for 27% of
Dormify’s total email revenue.
“The automated emails we’re sending as part of our Connect Abs
app, which is a component of the toning belt, are a success story
for us. We’ve considered the different journeys our customers take
once they’ve purchased a product. For example, what happens
when they start a toning programme? And what happens when
they finish a toning programme? So far, we’ve seen a 21% success
rate in encouraging people to pick their belt back up and start
toning again,” said Doug Taylor, CRM Manager.
We’re able to automate aspects of
the process, like generating dynamic
coupon codes and shopping cart
abandonment behaviour within
Magento and into dotmailer.
Nicole Gardner, Dormify, COO
Other ecommerce brands we work with include:
18
dotdigital Group Plc
Annual Report 2015/2016
dotdigital Group Plc
Annual Report 2015/2016 19
Strategic report
Chief Executive’s Officer’s report
Milan Patel
Chief Executive Officer
Our performance is a result of continued strong
organic growth, high margins and long-term
recurring revenues generated from the dotmailer
marketing automation product.
Introduction
Review of 2015/16
In addition, we have seen a strong performance
I am pleased to announce that the Group
Revenue performance, which grew organically
from our professional services offerings,
delivered strong organic revenue growth of
by 26%, was driven by strong growth from
with an increase in revenue from £2.8m to
26% which was in line with market expectations.
both the UK and the international markets.
approximately £3.1m, which delivers gross
Our earnings before interest, tax, depreciation
The UK operation grew by 21% from £18.3m
margins in the region of 60%.
and amortisation (EBITDA) and profit before
to £22.0m through a combination of higher
tax were both £0.3m ahead of the consensus
value new client wins and continually being able
During the year, the Group’s average monthly
Through the partnership with Magento and
the joint marketing efforts, we are increasingly
seeing partnership referrals from both system
integrators and technology partners in the
Nordics and Benelux regions. Encouragingly
there has been an increase in the number of
market forecasts.
to monetise the advanced feature adoption by
spend per client rose by 29% to spend levels
clients coming on board from the Netherlands.
our existing clients through the ability to bolt
of circa £575 per month. This is as a result of
Although it is too early to tell, the dotmailer
This performance is a result of continued strong
on extensions and build their own marketing
continued focus on mid-market, enterprise
organic growth, high margins and long-term
cloud. This is evidenced by revenues from
clients and the Magento connector clients who
recurring revenues generated from the dotmailer
functionality related monthly recurring charges
spend on average of over £1,300 per month.
marketing automation product.
now achieving over £4m, which is an increase
of 106%. We continue to make progress within
EMEA (Europe, Middle East & Africa)
proposition has also been well received within
United Arab Emirates and South Africa, where
we have seen numerous client sign-ups in this
financial year. Our aim is to continue to market
into both these regions and assess our sales
Financial highlights
the international markets with revenues outside
of the UK increasing by 58% to £4.9m. This
30.06.16
(£m)
30.06.15
(£m)
%
increase
remains a focus for the coming year.
Revenue
EBITDA
Net assets
EPS
26.9
21.4
8.0
23.7
1.83
6.8
18.4
1.63
26
17
29
12
The Group has added notable clients across its
markets both locally and internationally in the
B2B and B2C sectors. Some of these include:
Vogue UK, Handelsbanken, Saville Group,
Dune, Hawes and Curtis, Paul Smith, Eurostar
International, Osprey Europe, Edcon, Mr Price
and Sol Lingerie.
EMEA has performed strongly, with growth
in the UK of 21% driven by the upselling of
advanced functionality to our existing client base
and a reasonable number of new client sign-ups
with a high spend level. We have also seen
good traction within South Africa and Middle
East, with high-value clients being signed.
In building the dotmailer brand within EMEA,
we have seen an increased number of leads
and traffic to the site in Western Europe. Senior
management, with the support of the Board
of Directors, are investigating both the potential
and benefit of implementing a self-serve model.
This model would take advantage of website
traffic we’re seeing from outside of the UK,
and in the markets where we do not currently
operate. The end goal will be to test the market
proposition in new territories with a relatively
low investment.
strategy in the coming period.
Additionally the pricing and bundles strategy
We were in search of a Channel Director to build
has been adapted through the learnings we
our channel strategy and take advantage of new
North America
took operating within the US to be more
partners and indirect relationships. However,
Our US region has continued to perform well
competitive. The move away from monthly
due to the competitive environment, we decided
with revenues growing by 43% from US $3.0m
pricing based on volume of messages to the
to engage a consultancy to assist us in building
to $4.3m although this was slightly slower
number of contacts stored is showing good
a channel partner programme. The partner
than originally anticipated because of delayed
signs of acceptance from prospects.
progress in recruiting good talent in the US
program has now been implemented and is
being controlled by the new EVP for the North
market. During the year we also hired new talent
A key decision made in the year was to
American region.
who are focused on business development,
postpone the opening of the West Coast and
and have also invested in new hires within
mid-US office and this will be reassessed once
services; the latter is to support future growth
the pricing and leadership have seen demand
in this region and we expect this to start to drive
build. Therefore the plan going forward is to
growth late in the 2016/17 financial year.
continue to sell and service these regions from
our East Coast office.
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Strategic report
Chief Executive’s Officer’s report
continued
Asia Pacific
CRM
At the same time there has been a rise in other
We initially entered the Asia Pacific market
There has been an increased uptake of our
ecommerce platforms such as Woo Commerce,
through creating a hub from Australia and using
CRM connectors with new prospects starting
and Shopify+ within the mid-market segment,
an indirect channel model focused on sales on
with some form of integration to make the data
so we are evaluating the opportunity of building
our Magento connector. When we entered into
synchronisation process painless. We have
connectors into these platforms.
the Asia Pacific market, we chose to work with
recently partnered with OroCRM which targets
partners that already had a solid client base
midsize B2B ecommerce. The development
Technology, product development
in the region. This strategy was slow to gain
of the connector has started and is scheduled
and support
traction in the beginning, however relationships
to be complete in early January 2017. It is
Throughout this year we have rearchitected
are now very strong. In June we took the
expected that we will continue to devote further
the dotmailer system with the use of Hybrid
decision, through the feedback we received to
resources to CRM integrations in 2017.
cloud infrastructure, which is a very innovative
build a team which is selling directly into both
Australia and the broader Asia Pacific region.
Ecommerce
way of building scale. The data processing and
storage is now done through using Microsoft
Early signs have been promising. We have seen
In the year, dotmailer was named the exclusive
Azure cloud technology. We currently have
revenues of AU$0.6m in the first 12 months
global premier partner for its Magento connector
both North America and Europe covered, with
of establishing our Sydney office.
in the marketing automation space. We are
the plan of deploying Asia Pacific early 2017.
proud to have our connector endorsed by
This will give dotmailer a unique selling point
Connectors
Magento who are the market leaders for
by having the ability to process data, in three
Further recruitment was made into the
midmarket ecommerce solutions. However,
separate continents, from a data privacy, latency
platform engineering team combined with an
uptake to their Magento Version 2 platform has
and redundancy perspectives. With the move
increased emphasis on enhancing our Microsoft
been slower than anticipated due to ecommerce
to the cloud another added advantage is that
Dynamics, Salesforce and Magento connectors.
clients being risk averse and waiting for Version
it provides burst for processing and storage
As part of our continued commitment to
2.1. This has now been released by Magento,
during seasonal demands such as Christmas,
scalability, we have put these connectors into
which has started to see strong pipeline of
Black Friday and Cyber Monday as opposed
our cloud hosting environment and plan to
this version in all regions across the world.
to having to invest further in hardware.
add additional functionality to further penetrate
this opportunity.
Going forward, our aim is to continue to build
The tenets of our product development strategy
and develop strong relationships with Magento
remain ‘Ease of Use’ and ‘Ease of Intergration’.
and its system integrators. In the period,
Our highly skilled developers continue to create
monthly recurring revenues from this connector
functionality that makes it easy for marketers
have continued to show strong growth of
to understand, deliver complex marketing
25% year-on-year spend, with the average
processes and integrate with best-of-breed
monthly client spend being considerably higher
platforms they already use. The product
at £1,300 per month compared to £575 per
steering team are now looking to build further
month for the entire client base.
functionality that matches our tenets and fits the
sweet spot characteristics of our customers.
We have continued to invest in our support
team as we have started to build more of
an international presence, with highly skilled
in-region teams, which help and support our
connectors, solve complex support issues
and provide round-the-clock assistance to
all our customers.
The dotties is one of our new initiatives, which is
exclusively for dotmailer customers and partners, and
is designed to celebrate email marketing excellence.
Milan Patel, Chief Executive Officer, dotmailer
Photographs from the dotties email marketing award evening.
People
We believe our people are so important for
After a six month term as Interim Chief
our business and its future and therefore further
Executive Officer following Simone’s departure
investment will be made in the training and
from the business, I have taken over this
development of all our employees. We are also
position permanently as of July 2016.
looking to appoint a CFO who will be able to
Throughout the interim period we continued
mentor the Finance Director and support me
to deliver on the original organic strategy set
with the day-to-day responsibilities.
by Simone at the beginning of the year.
Cash generation
We have also made some changes in the
The business continues to be highly cash
senior management team which looks after
generative, with cash at the end of the period
the day-to-day management of the business.
standing at £17.3m, which represents an
The main area of change is within sales
increase of 45% on the prior year (2015:
and operations.
£11.9m) after capital expenditure and product
development of £2.1m. The Group continues
The Global EVP of sales has been replaced
to be debt free and maintains a healthy
by the Chief Marketing Officer, who is now
balance sheet. Highly efficient cash collection
responsible for both sales and marketing teams
processes, along with over 40% of the monthly
in the UK, to allow closer alignment and to give
UK recurring revenue being collected by Direct
more transparency on the end-to-end sales
Debit, have contributed to the Group’s strong
funnel management. This has allowed us to
cash position at the year end. This is combined
create local sales leaders in every region.
with the implementation of enhanced global
strategies through ACH collection and a global
Following the year end the COO departed and
card payment processor.
the Board has taken the decision to split the
responsibilities amongst the senior team with
customer success being a core CEO focus.
This will also allow the direct reports to ensure
prioritisation of customer experience in the
short-term.
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dotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Strategic report
Chief Executive’s Officer’s report
continued
Dividend policy
Growth strategy
2 Product innovation
I am pleased to announce that the Board has
During the year we evaluated a number of
We will continue to diversify our revenues by
conducted its review of its business plan for
potential acquisition opportunities in the email
integrating with new technologies within the
the next three years. This included evaluating the
marketing space. However, as in prior years,
ecommerce and CRM space. We’ll also look
cash needs required for opportunities in organic
none of the businesses evaluated would create
for any other technology platforms that make it
growth to increase shareholder value, capital
long-term shareholder value when integration
easier for our midmarket customers to achieve
expenditure and any possible future acquisitions
risks and migration of clients was factored
an increased return on investment from their
that could be earnings enhancing. It has
in. We will continue to consider acquisition
marketing campaigns. To date we have been
decided that it will keep a progressive dividend
opportunities of bolt-on technologies,
able to monetise the functionality that we build
in line with EBITDA growth, supplemented by
whitelabels of our product and other email
through incremental recurring functionality
special dividends from time to time.
service providers. We anticipate further organic
charges which are sold onto our new and
Therefore, subject to approval at the AGM in
key areas:
them. This will continue to remain a very high
growth by focussing on the following three
existing customers as and when they need
December 2016, the Board proposes that the
priority for me.
Group will pay a regular dividend of 0.43 pence
1 Geographic expansion
Looking forward
The Magento Version 2.1 pipeline is accelerating
In summary, our approach for 2017 will be
per ordinary share; and in addition, for this
International expansion investment will be higher
3 Strategic partnerships
With the combination of both a self-serve
globally, which is encouraging for us as we
further refinement of the partner programme
reporting period and also proposes a special
to gain wider brand awareness and market
We will continue to work closely with Magento
model and the direct sales team approach,
try to take advantage of both an existing client
and developing strategic partnerships. There
dividend of 0.41 pence per ordinary share,
presence within EMEA, North America and
on joint marketing efforts for more sign-ups
we will be able to penetrate further into the
migration from Version 1 to 2, and a new
will also be global expansion into the EMEA,
both to be payable at the end of January 2017.
Asia Pacific. We will continue to test the market
to the Magento Version 2.1 and subsequently
EMEA, North American and Asia Pacific
ecommerce installation within the midmarket
North America and Asia Pacific regions through
appetite and proposition in these regions to
increasing the use within that community of
regions. Early indications are encouraging
and small enterprise space. We will continue
a self-serve model and introduction of direct
understand which will generate the highest
the dotmailer platform. We have also started
although as expected it will take some time
to build and develop our relationship to take
sales teams. We will continue to build new
returns for our modest spend in sales and
to develop further partnerships with PayPal
to increase the brand presence in those
advantage of this, and continue to build new
integrations into more ecommerce and CRM
marketing. As we start to gain traction and see
to bring a one click purchase offering for our
markets. We have seen increased numbers
strategic relationships with the technology
platforms which focus on the mid-market and
opportunities in any specific territory, we will
ecommerce clients.
of customers from Netherlands, South Africa,
partners we integrate with.
small enterprise space.
adapt our model for these markets. Following
this we could offer initially a self-serve product
followed by or combined with a direct sales
team. The infrastructure for this will be the three
main hubs in the UK, US and Australia.
dotmailer is in complete alignment
with Magento’s strategy of making
ecommerce as easy as possible.
Mark Lavelle, CEO, Magento Commerce
UAE and parts of Western Europe combined
with the core UK market seeing growth in
With the increased focus last year on building
The Board believes that the dotmailer platform,
digital marketing budgets.
the partner programme by the use of an outside
with its ease-of-use proposition, deep
consultancy firm, we have seen good growth
integrations, professional services, growing
In readiness for an increased focus on
in the international partner network and the
list of global partners and its scalability, is well
international revenue growth, we now have
existing relationships will strengthen as we go
placed to continue to generate strong organic
a platform that is globally scalable both from
into the new financial year.
growth; not only from the markets it currently
an infrastructure and global payments solution
operates in today, but wider into the global
perspective. The self-serve model will start to be
The ongoing investment in CRM connectors
markets it is looking to enter.
deployed during the second quarter of the new
and other advanced functionality development
financial year. By the third quarter we expect to
has helped the Group continue to increase
have data processing and storage within the
functionality based recurring charges which
three central hub regions, which will be a unique
should lower attrition levels in our customer
selling point for prospects and clients especially
base. We will continue to add new integrations
in the Australian region.
with best-of-breed technology platforms that
target the mid-market and small enterprise
After the initial venture into the Australian region,
space as a high priority for the platform
we have now put in a direct sales team and
engineering team.
support network for them following the learnings
Milan Patel
Chief Executive Officer
from being there for 12 months. As a direct
The Board will continue to assess the impact
18 October 2016
consequence, early signs indicate an increased
of Brexit and macro-economic uncertainty over
number of sign-ups from customers and early
the coming year.
pipeline build-up from the Asian markets.
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dotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Sector experience
Finance and insurance
From retail banking and insurance to currency card
providers, we offer a secure, stable platform to businesses
operating in regulated industries.
In fact, in 2016 we were the first email service provider
(ESP) to become EU-US Privacy Shield certified and we’re
proud to be the only ESP that’s truly encrypted.
Aston Scott is a specialist insurance broker with an enviable track
FAIRFX provides prepaid foreign currency cards which can be
record of producing innovative and unusual risk transfer solutions
topped up at any time, offer low exchange rate and transaction fees,
for niche markets.
and come with the added security of Chip & PIN. However, a major
problem faced by FAIRFX is that customers can sometimes get
The insurance industry gets just one chance a year to do business
confused about how they work.
with clients, so keeping them aware of their broker, as well as
ensuring that the renewal proposal is timely, relevant and accurate
FAIRFX found that that the FAQs section of its website was
can be a major challenge.
generating a lot of traffic. Utilising the dotmailer WebInsight tool,
FAIRFX created a series of emails that answered these questions
Aston Scott’s RoadRunner product was launched in 2005, and
before people asked them, reducing helpdesk calls and improving
it has built up detailed data on everyone they’ve had contact with
the customer experience. Now, customers automatically receive an
since then.
email with tailored content relevant to their browsing habits.
The team at Aston Scott uses a set of automation rules and
Another automated program FAIRFX has used dotmailer to
triggers to send out renewal reminders in the weeks before
implement is the birthday program. Turnover generated from this
customers’ policies are about to expire. “We know the renewal
campaign rose by more than 300% in just eight months, all from
dates for a high percentage [of customers], and a lot of detail
a simple ‘Happy birthday’ message.
about their insurance requirements and preferences. The key
to using this data successfully in marketing is to personalise
and segment campaigns,” said Ben Read, Aston Scott’s Group
Marketing Manager.
Email marketing automation has done more than just allow the
team to deliver personalized renewal content at scale - it’s given
them back the most precious commodity of all: time. As Ben puts it
“I can now focus on outcomes rather than inputs, which is a much
better way to operate.”
Other finance and insurance brands we work with include:
As a result of introducing email automation, we’ve
saved around 20% of our time just from not having
to move information between multiple systems.
Ben Read, Group Marketing Manager, Aston Scott
26
dotdigital Group Plc
Annual Report 2015/2016
dotdigital Group Plc
Annual Report 2015/2016 27
Strategic report
Corporate social
responsibility report
During the past year the Group continued
dotdigital products and services are supported
Employee engagement and
Our constantly evolving and expanding partner
Environmental partnership
Risks
with its on-going commitment to social
by an expert team; giving access to support
equal opportunity
network is key to developing close business
Our tried and tested adoption of reduce,
The Board is aware of the need to monitor
responsibility in the market in which it
via email, telephone and live chat. We also
The Group’s policy and commitment is
relationships through informal and formal
reuse, recycle runs through all our offices.
potential threats to the business and our
operates, to its employees, suppliers and
provide additional managed services for
to ensure, fairness, equal opportunity and
events, meet-ups and seminars. We share the
As a digital business we continue to strive to
workforce. To this end the Board has
to the broader environment.
our products, enabling our clients to deliver
elimination of all forms of discrimination
advantage of our cutting edge office space to
reduce printing and waste and increase the
established a Risk Committee consisting of both
successful campaigns and projects.
for all employees across the group.
support and host an increasing number of such
levels of recycling wherever possible.
Non-Executive Directors and management.
As a company admitted to trading on
events. The business benefits that these close
This committee meets regularly to evaluate
AIM, dotdigital is not required to produce
Employees
This extends to ensuring that all recruitment
relationships provide are immediate and obvious
Our office hot-desking arrangements and
on-going risks to the business and this includes
a corporate social responsibility report.
The Group’s ongoing commitment to ensuring
and selection is completed on the basis of the
to all involved.
flexible approach to appropriate telecommuting
risks posed both to our employees and any
However, the Directors believe that in the
our employees continue to experience ample
job-related criteria and appointments made
ensure we avoid unnecessary travel whenever
potential risks to the business from suppliers
interest of transparency a brief commentary
opportunity for learning and development. This
on the merits of the individual’s abilities.
Community partnership
possible.
should be included.
is a blended approach of internal and external
The charity support and fundraising activities
and partners. Any recommendations by this
committee are put directly to the Board for
courses as well ensuring Managers create an
As a positive example of our commitment we
driven by our employees continues to grow
Ensuring we work with datacentre partners
further discussion and implementation.
Clients
environment and opportunity that encourages
are delighted to be working with our employees
and develop. Either as individuals or as part of
that set industry standards in energy efficiency
The Company prides itself on ensuring that
all employees to further their careers through;
to create and support the dotmailer LGBT
the dotCommunity & dotFoundation networks,
ensures we minimize our energy footprint.
Strategic report
our products and services are designed to
promotion, special projects, overseas
Network. The LGBT Network will be open to
our employees have supported a number of
meet the expectations of our clients and their
secondments and ongoing learning.
anyone interested in the work of the network,
charities raising £4,300 for Macmillan Cancer
Suppliers
The strategic report was approved by a
duly authorised committee of the Board of
customers. Feature forums are offered to
independently from their sexual or gender
Research UK, NSPCC, Breck Foundation, Mind,
As a part of the Group’s strong commitment
Directors on 18 October 2016 and signed
allow clients to request features and vote
The focus for the current delivery of formal
identities. Creating an environment in which
Surviving Antidepressants, The Eve Appeal &
to our local community we aim to source local
on its behalf by:
on feature priority, which feeds directly into
external training includes; sales training,
all staff can be comfortable about their sexual
Breast Cancer.
the development schedules for our SaaS
leadership and management, presentation
orientation or gender identity is therefore
suppliers wherever possible. This is underlined
by the fact that a number of our suppliers have
product offerings.
and communication, client management,
important to maximising the effectiveness
In addition, dotmailer has continued to develop
been with the Group for many years and we
The Group is committed to complete
team working and negotiation.
of staff.
its community links with Croydon. A current
consider our key suppliers as partners. The
focus for this work is to directly support Croydon
Group aims to work with partners and suppliers
transparency with our clients, providing
The further expansion and maturity of our
Business partnership
Council’s ‘Croydon Good Employer’ Charter
with similar ethical standards and values. At
pricing structures that are clear, and offering
international operations presents additional
dotdigital believe that strong and effective
by co-chairing a steering group and adding the
dotdigital we understand the importance of
packages that allow clients to deliver successful
challenges and opportunities when considering
partnerships within our business community,
weight of, dotmailer, a well-respected Croydon
fair and equal treatment, and particularly drive
Milan Patel
campaigns. A pricing calculator is provided for
the attraction and retention of employees.
is an important factor that promotes mutual
business to the charter initiative.
towards transparent and fair payment terms
Chief Executive Officer
dotmailer licenses and packages to allow clients
As such, we have invested in ensuring our US
success for our partners and suppliers.
and potential clients to cost their campaigns.
benefits and working environments are attractive
As dotdigital continues to act on its strategy
to current employees and fit-for-purpose to
of global growth, we will build upon our UK
support our continued strategic growth plans.
experience in; the USA, Australia and beyond.
and processes.
18 October 2016
28
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dotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016
Governance
Board of Directors
Milan Patel, FCCA ACSI
Chief Executive Officer,
Chief Finance Officer,
Company Secretary
Simon Bird
Co-Founder
Ian “Tink” Taylor
Co-Founder
Frank Beechinor-Collins
Non-Executive Chairman
Peter Simmonds, FCCA
Non-Executive Director
Richard Kellett-Clarke, FCA
Non-Executive Director
Milan joined the Company in 2007 and
Simon Bird has developed an in depth
Tink Taylor has 20 years’ experience in
Frank Beechinor, was for 11 years, CEO and
Peter Simmonds was Chief Executive Officer
Mr Richard Kellett-Clarke brings to the
was appointed Group Company Secretary
technical knowledge of the internet and its
digital marketing in both the UK and now the
co-founder of One Click HR, an AIM quoted
of dotmailer and then dotdigital Group Plc
Board over 25 years of management
in 2009, CFO in 2015 and CEO in 2016.
applications. Prior to co-founding dotdigital
US. Since 2006 he has been an influential
IT/Human Resources business which
for eight years from 2007 to 2015. Following
experience in the turnround and strategic
Group he assisted in the development of a
member of the UK Direct Marketing
operated in the UK and North America and
his retirement in June 2015 he stepped
repositioning and recovery of creative
Milan is a fellow member of the Association
major internet access provider.
of Chartered Certified Accountants, an
Association’s Email Marketing Council and
also a member of the Internet Advertising
had around 200 employees. Frank oversaw
down into the role of Non-Executive Director.
businesses in CMCG, media, electronics
the successful sale of the business to ADP,
Peter commenced his career in 1976 as a
and software industries.
associate member of the Chartered Institute
He has provided services to a number of
Bureau’s e-communications council.
a $4bn NYSE listed company, for US $25m.
trainee accountant with Unilever Plc and has
of Securities and Investments.
well-known companies and organisations in
nearly 40 years of commercial experience
He was a founder of AFX NEWS Limited,
helping create websites, intranets, extranets,
In 2014, Tink was elected as Advisory
Frank brings a great deal of corporate
mostly at senior management and board
now part of Thomson Reuters, and Sealed
He has been responsible for the admission
content management systems and other
Committee Member of the Board of the
experience and a strong track record in
level, principally in the areas of software,
Media, now owned by Oracle. He was part
to Plus and the introduction to AIM. He is
online solutions.
US Direct Marketing Association’s Email
M&A to the Board, gained over 25 years of
banking, insurance and outsourcing.
of the team as CFO which brought Pickwick
also responsible for the Group’s functions
Experience Council. He constantly strives to
working for and running public and private
Group PLC to the main market and Brady
in financial management and reporting,
He is prominent on the tech entrepreneur
help individual organisations, and the industry
companies. Frank is also currently a Non-
He has considerable business
Plc to AIM. He is currently the CEO of Idox
regulatory compliance, legal and corporate
scene and heavily involved in the selection,
as a whole, to develop and progress.
Executive Chairman of Redstone Connect
entrepreneurial experience having been
Plc an AIM listed specialist software and
governance. He also brings substantial
recruitment and retention of dotmailer’s
strategic financial experience to the Board.
technical partners.
As well as financial accumen he has
developed a broad range of operational
competencies, a grasp of strategic
objectives, clear leadership and strong
decisive management skills.
Plc an AIM-listed business.
involved at start up or early stage of a
services business.
number of companies in various industry
sectors. Peter also has experience of
business acquisition and post-acquisition
integration. Peter currently also holds board
positions in the role of Chairman at Cloudcall
Group plc and IS Solutions plc (both AIM-
quoted companies). In July 2016 he was
appointed as a Non-Executive Director
of Eckoh plc and on 6 October 2016
he was appointed as a board member
of The Quoted Companies Alliance.
30
31
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Corporate governance
report
Audit Committee
report
The Board has sought to comply with a
number of provisions of the 2014 UK Corporate
(b) Directors’ remuneration
As set out on pages 34 and 35 the remuneration
internal control and risk management further
into the operations of the business and to deal
The Audit Committee is a sub-committee
of the Board. The responsibilities of the
Composition of the Audit Committee
The Audit Committee comprises Frank
Independence of external auditors
Both the Board and the external auditors
Governance Code (“the Code”) in so far as
of the Executive Directors is determined by the
with areas of improvement which come to
committee include:
Beechinor-Collins, Peter Simmonds and
have safeguards in place to avoid the possibility
Richard Kellett-Clarke. The Chairman of the
that the auditors’ objectivity and independence
Audit Committee is Richard Kellett-Clarke.
could be compromised.
The Committee meets separately with the
external auditors without management being
Our policy in respect of services provided by
present. The Secretary to the committee is
the external auditors is as follows:
George Kasparian.
• Audit related services – the external
it considers them to be appropriate for a
Remuneration Committee, whilst that of the
management and the Board’s attention.
company of their size and nature. They make no
Non-Executives is determined by the whole
statement of compliance with the Code overall
Board. The Directors are conscious of the
The Directors acknowledge their responsibilities
and do not ‘explain’ in detail any aspect of the
importance of performance-related incentives
for the Group’s system of internal financial
Code with which the Group does not comply.
and bonuses are paid based on performance
control. Such a system can provide reasonable
Compliance statement
(a) Directors
The details of the Group’s Board, together
with the Audit and Remuneration Committee,
are set out on pages 33 and 34.
as deemed appropriate by the Remuneration
but not absolute assurance against material
Committee. The Remuneration Committee use
misstatement or loss. The Board confirms that
both financial and non-financial benchmarks to
the procedures necessary to comply with the
determine the Executive Director bonuses.
provisions of the Code, including the guidance
(c) Relations with shareholders
The Group encourages two-way
of Turnbull, have been in place throughout the
year ended 30 June 2016 and up to the date
of the Report of the Directors. It has considered
The Board meets monthly and is responsible for
communications with all its shareholders
the major business risks and the control
strategy, performance, approval of major capital
and responds quickly to all requests or
environment. Important control procedures,
projects and the framework of internal controls.
queries received.
The Board has a formal schedule of matters
in addition to the day-to-day supervision of
the business, include comparison of monthly
reserved for specific review and decision.
All shareholders have at least twenty-one clear
management accounts to the budget.
To enable the Board to discharge its duties,
days’ notice of the Annual General Meeting
all Directors receive appropriate and timely
at which all of the Directors and the Chairman
(iii) Audit committee and auditors
information. Briefing papers are distributed to
are normally available for questions. Comments
The Audit Committee comprises Frank
• Reviewing the half-yearly and full year
accounts and results announcements
of the Group and any other formal
announcements relating to the Group’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;
Main activities of the Audit Committee
At its meeting on 11 October 2016 the
Committee reviewed the Group’s preliminary
announcement of its results for the financial
year 30 June 2016 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 external auditors also presented their
all Directors in advance of Board meetings.
and questions are encouraged from the
Beechinor-Collins, Peter Simmonds and is
• Monitoring and reviewing the effectiveness
proposed fees and scope for the forthcoming
All Directors have access to the advice and
shareholders at the meeting.
chaired by Richard Kellett-Clarke (FCA). The
services of the Company Secretary, who is
responsible for ensuring that Board procedures
are followed and that applicable rules and
(d) Accountability and audit
(i) Financial reporting
auditors of the Group may also attend part or
all of each meeting and they have direct access
to the committee for independent discussions,
regulations are complied with. At the year
Detailed reviews of the performance and
without the presence of the Executive Directors
end there were three Executive Directors,
financial position of the Group are included
if required. The Audit Committee may examine
two independent Non-Executive Directors
in the Chief Executive’s statement. The Board
any matters relating to the financial affairs
and an independent Non-Executive Chairman.
uses this and the Report of the Directors
of the Group, and to the Group’s audit.
The current composition of the Remuneration
and understandable assessment of the
and announcements, accounting policies,
Committee and the Audit Committee is shown
Group’s position and prospects. The Directors’
compliance with accounting standards, the
on pages 33 and 34.
responsibility for the financial statements is
appointment and fees of auditors and such
on pages 36 to 37 to present a balanced
This includes review of the annual accounts
described on page 37.
other related functions as the Board may
Appointments to the Board are nominated
require.
by an Executive Director and then considered
(ii) Internal control
by the full Board.
The Board confirms that it has established
(iv) Going concern basis
the procedures necessary to implement the
After making enquiries, the Directors have
The service contracts of the Executive Directors
guidance set out in “Internal Control: Guidance
formed a judgment, at the time of approving the
runs for one year and terminable by six months’
for Directors on the Combined Code”. The
financial statements, that there is a reasonable
notice, by either party to expire at the end of that
process of risk identification, evaluation and
expectation that the Group has adequate
year or any time thereafter.
management has been considered by the
resources to continue in operational existence
Board. It is the intention that this will continue
for the foreseeable future. For this reason the
to be kept under constant review and will be
Directors continue to adopt the going concern
considered at each Board meeting in the future.
basis in preparing the financial statements.
The Board is continuing to take steps to embed
and independence of the external
year’s audit. The Committee also reviewed the
auditors, agreeing the nature and scope
performance of both the internal accounting
of their audit, agreeing their remuneration,
function and external auditors. The review of
and considering their reports on the
the external auditors was used to confirm the
Group’s accounts, reports to shareholders
appropriateness of their reappointment and
and their evaluation of the systems
of internal financial control and risk
management.
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.
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 2017. The Committee
concluded that these budgets were both
prudent and realistic in the context of the
Group’s ambitions.
32
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Governance
Remuneration
Committee report
The Remuneration Committee
The Group discloses the following information
on Directors’ remuneration mindful of Rule 19
Key elements of remuneration for
Executive Directors
The Committee considers the key elements
Service contracts
The Executive Directors each entered into
a service contract with the Group. Each
of the AIM rules and the fact that as the
in total to ensure there is the right balance
appointment runs for one year from that date
Company is quoted on AIM, it is not required
between reward for short-term success and
and is terminable by six months’ notice by
to comply with the Main Market UK Listing
long-term growth. For Executive Directors, this
either party to expire at the end of that year or
Rules or those aspects of the Companies Act
is summarised as follows:
at any time thereafter. The agreement contains
to listed companies regarding the disclosure
of Directors’ remuneration.
The Committee comprises Richard Kellett-
Clarke (Chairman) and Frank Beechinor-Collins.
The Secretary to the committee is Milan Patel,
Chief Executive Officer, 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
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
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
Enterprise Management Incentive (EMI),
an approved share option scheme 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 annual review process.
Discretionary bonuses are awarded based on
individual and Group performance.
•
Aligned to total reward structure for all
employees;
Approved by the Remuneration Committee
• Provided on a market-competitive basis.
Signed on its behalf by
Annual Bonus Scheme
• Group PBT with an individual performance
(c) To determine the terms of employment and
element linked to object delivery;
remuneration for Executive Directors.
• Drive profitability and strategic change
across the Group;
• Delivery of the overall business strategy.
Richard Kellett-Clarke
Chairman of Remuneration Committee
Non-Executive Directors
F Beechinor-Collins
R Kellett-Clarke
P Simmonds
Executive Directors
P Simmonds
I Taylor
S Bird
M Patel
S J Barratt
Non-Executive Directors
F Beechinor-Collins
R Kellett-Clarke
S J Barratt
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Pension
£’000
Share-based
payment
£’000
12-month period to 30.06.16
39
33
65
137
–
–
1
1
–
–
–
–
1
–
–
1
–
–
–
–
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Pension
£’000
Share-based
payment
£’000
12-month period to 30.06.15
175
125
120
159
77
656
8
8
10
11
–
37
75
25
25
75
–
200
18
12
14
15
–
59
–
–
–
20
–
20
Total
£‘000
40
33
66
139
Total
£‘000
276
170
169
280
77
Number of
outstanding
options
–
–
–
Number of
outstanding
options
–
–
–
1,427,397
–
972
1,427,397
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Pension
£’000
Share-based
payment
£’000
35
30
44
109
–
–
–
–
–
–
–
–
1
–
–
1
–
–
–
–
Total
£‘000
36
30
44
110
Number of
outstanding
options
Directors’ interests
The respective interests, all of which are beneficial, in the shares of the Company for the members of the Board at the year end are stated below:
I Taylor
S Bird
P Simmonds*
M Patel
S J Barratt
F Beechinor-Collins**
R Kellett-Clarke
No of shares held
% Holding
36,776,667
12.48
17,558,996
3,991,470
1,575,927
463,000
320,000
199,194
5.96
1.35
0.53
0.16
0.11
0.07
60,885,254
20.65
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
12-month period to 30.06.16
Ex-gratia
payment
£’000
Pension
£’000
Share-based
payment
£’000
120
54
205
183
562
18
3
9
3
33
–
–
125
–
125
–
–
–
137
137
12
13
20
–
45
–
–
–
114
114
Total
£‘000
150
70
359
Number of
outstanding
options
–
–
–
437
423,409
1,016
423,409
* 2,977,972 of Peter Simmonds holdings/voting rights have been held by Frank Nominees Limited which 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.
** The 199,194 shares 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.
Directors’ interest in share options
Under the Group’s executive share option scheme the following Directors have the right to acquire ordinary shares.
Executive Directors
S J Barratt
No. share
Grant date options granted
Option price
(pence)
Date first
exercisable
Expiry
date
20/06/16
423,409
£Nil
20/06/16
20/12/16
35
Executive Directors
I Taylor
S Bird
M Patel
S J Barratt
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Governance
Report of
the Directors
The Directors present their report with the
The Directors who served during the period and their beneficial interests in the shares of the Group
financial statements of the Company and the
as recorded in the Register of Directors’ interests at 30 June 2016 are as follows:
Group for the year ended 30 June 2016.
Information relating to principal activity, review of
business, key performance indicators and future
outlook is included within the strategic report.
Principal activity
The principal activity of the Group in the year
under review was that of providing intuitive
software as a service (“SaaS”) and managed
services to digital marketing professionals.
Review of business
During the year the Group has shown significant
Directors
I Taylor
S Bird
P Simmonds
M Patel
S J Barratt
30.6.16
30.6.15
Number of
shares held
Percentage
shareholding
%
Number of
shares held
Percentage
shareholding
%
36,776,667
12.48
39,276,667
17,558,996
3,991,470*
1,575,927
463,000
5.96
31,276,667
1.35
0.53
0.16
7,073,841
1,048,530
377,500
13.69
10.90
2.46
0.37
0.13
0.11
0.10
R Kellett-Clarke
320,000
0.11
320,000
F Beechinor-Collins
199,194**
0.07
299,194
growth from continuing operations in customer
*Frank Nominees Limited holds 2,977,972 shares in respect of Peter Simmonds holding/voting
numbers, sales and profits. Revenues grew
rights acting as nominee for Alliance Trust Pensions Limited. Frank Nominees is a vehicle used by
from £21.4m in the year ended June 2015
Kleinwort Benson Limited to hold securities for clients, trusts, SIPPs etc. The beneficiary of the
to £26.9m for the year ended June 2016,
SIPP is Peter Anthony Simmonds.
an increase of 26%.
Pre-tax profit grew from £5.2m in 12 months
a trust established for the benefit of his children and in which he has no beneficial interest.
** The 199,194 shares shown as being held by Mr Beechinor-Collins are owned by Curra Trust,
to June 2015 to £6.2m for the year ended
June 2016, an increase of 19%.
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 2016 are as follows:
Executive Directors
M Patel
S J Barratt
30.6.16
Number of
options held
30.6.15
Number of
options held
–
1,427,397
423,409
–
Substantial interests
On 10 October 2016, 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:
Key performance indicators
The operations as a whole and the individual
business units are managed and controlled
using a variety of key performance indicators
appropriate to the goals they have been set.
Examples of key performance indicators from
the Group are:
Revenue
EBITDA
2016
(£m)
2015
%
(£m) increase
26.9
21.4
26%
8.0
6.8
17%
Volume of sends (m) 8,640
5,760
50%
Dividends
The Board proposes a dividend payment of
£2,476,000 comprising an ordinary dividend
of 0.43p and a special dividend of 0.41p per
ordinary share (2015: £1,041,000 0.36p per
Shareholder
I Taylor
Lion Trust Asset Management
S Bird
Slater Investments Ltd
JO Hambro Capital Management
Herald Investment Management
ordinary share) to be distributed to shareholders
Franklin Templeton Fund Management
in respect of the Group’s reported performance.
Alliance Global Investors GmbH
The Board’s dividend policy will be reviewed
annually in line with ensuring that there is
adequate cash within the business to maintain a
high-growth strategy.
NFU Mutual
Polar Capital LLP
Hargreave Hale Ltd
36
Number of
shares held
36,776,667
36,093,503
17,558,996
16,770,000
14,895,000
13,490,804
13,000,000
9,608,100
9,473,000
9,470,067
9,250,000
Percentage
shareholding
%
12.48
12.24
5.96
5.69
5.05
4.58
4.41
3.26
3.21
3.21
3.14
Future outlook
The Group provides email and cross-channel
Events after the reporting period
There are no events after the date of this
reasonable accuracy at any time the financial
position of the Company and the Group
marketing technology and services. Each
report or the date the financial statements
and enable them to ensure that the financial
of these areas has shown market growth
were approved by the Board of Directors
statements comply with the Companies
significantly above that of the UK economy.
which impact on the figures as presented.
Act 2006. They are also responsible for
The Board believes that our widespread brand
recognition and strong product will continue to
present opportunities to expand and diversify
Listing
The Group’s ordinary shares have been traded
safeguarding the assets of the Company and
the Group and hence for taking reasonable
steps for the prevention and detection of fraud
profitability in the coming year.
on London Alternative Investment Market (AIM)
and other irregularities.
since 29 March 2011. N+1 Singer are the
Directors
The Directors shown below have held office
Group’s nominated adviser and together with
The Directors are responsible for the
Finncap are the joint brokers. The closing mid-
maintenance and integrity of the corporate and
during the whole of the period from 1 July 2015
market share price at 30 June 2016 was 40.50p
financial information included on the Company’s
to the date of this report.
(2015: 34.25p).
S Bird
P A Simmonds
I Taylor
R Kellett-Clarke
F Beechinor-Collins
M Patel
Statement of Directors’ responsibilities
The Directors are responsible for preparing
the Report of the Directors and the financial
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from legislation
in other jurisdictions.
statements in accordance with applicable law
Statement as to disclosure of information
and regulations.
to auditors
So far as the Directors are aware, there is no
S J Barratt (resigned 20/07/16)
Company law requires the Directors to prepare
relevant audit information (as defined by Section
financial statements for each financial year.
418 of the Companies Act 2006) of which
Indemnity of officers
The Group purchases directors and officers
Under that law the Directors have elected to
the Group’s auditors are unaware, and each
prepare the financial statements in accordance
Director has taken all the steps that he ought
insurance against their costs in defending
with International Financial Reporting Standards
to have taken as a Director in order to make
themselves in legal proceedings taken
as adopted by the European Union. Under
himself aware of any relevant audit information
against them in that capacity, and in respect
company law the Directors must not approve
and to establish that the Group’s auditors are
of damages resulting from the unsuccessful
the financial statements unless they are satisfied
aware of that information.
defence of any proceedings.
that they give a true and fair view of the state of
Financial instruments
Details of the Group’s risk management
affairs of the Company and the Group and of
the profit or loss of the Group for that period.
Auditors
The auditors, Jeffreys Henry LLP, will be
In preparing these financial statements, the
proposed for reappointment at the forthcoming
objectives and policies together with its
Directors are required to:
Annual General Meeting.
exposure to financial risk are set out in Note 21
• select suitable accounting policies and
to the financial statements.
then apply them consistently;
On behalf of the Board
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.
• make judgments and accounting
estimates that are reasonable and
prudent;
• state whether the Group and Parent
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 enquiries, the
Directors consider that the Company and the
Company financial statements have been
prepared in accordance with IFRSs as
adopted by the European Union subject
to any material departures disclosed and
explained in the financial statements;
Milan Patel
Chief Executive Officer
18 October 2016
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
Group has adequate resources to continue in
The Directors are responsible for keeping
operational existence for the foreseeable future.
adequate accounting records that are sufficient
For this reason they continue to adopt the
to show and explain the Company’s and
going concern basis in preparing the financial
the Group’s transactions and disclose with
statements.
37
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s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Governance
Report of the
independent auditor
We have audited the financial statements of
Scope of the audit of the financial
dotdigital Group Plc for the year ended 30
June 2016, which comprise the consolidated
statements
An audit involves obtaining evidence about
• The financial statements have been
prepared in accordance with the
requirements of the Companies
income statement, consolidated statement of
the amounts and disclosures in the financial
Act 2006.
comprehensive income, consolidated statement
statements sufficient to give reasonable
of changes in equity, company statement of
assurance that the financial statements are
changes in equity, consolidated statement
free from material misstatement, whether
of financial position, company statement of
caused by fraud or error. This includes an
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion the information given in the
financial position, consolidated statement of
assessment of: whether the accounting policies
Report of the Directors and Strategic report
cash flows, company statement of cash flows
are appropriate to the Group’s and the Parent
for the financial year for which the financial
and the related notes. The financial reporting
Company’s circumstances and have been
statements are prepared is consistent with
framework that has been applied in their
consistently applied and adequately disclosed;
the financial statements.
preparation is applicable law and International
the reasonableness of significant accounting
Financial Reporting Standards (IFRSs) as
estimates made by the Directors; and the
adopted by the European Union, and as regards
presentation of the financial statements. In
the Parent Company financial statements, as
addition, we read all the financial and non-
Matters on which we are required
to report by exception
We have nothing to report in respect of
applied in accordance with the provisions of
financial information in the Chairman’s and Chief
the following matters where the Companies
the Companies Act 2006.
Executive Officer’s report, Corporate Social
Act 2006 requires us to report to you if,
Responsibility report, Corporate Governance
in our opinion:
This report is made solely to the Company’s
report, Audit Committee report, Remuneration
members, as a body, in accordance with
Committee report and Directors’ report to
Chapter 3 of Part 16 of the Companies Act
identify material inconsistencies with the
2006. Our audit work has been undertaken so
audited financial statements and to identify
• Adequate accounting records have not
been kept by the Parent Company, or
returns adequate for our audit have not
been received from branches not visited
that we might state to the Company’s members
any information that is apparently materially
by us; or
those matters we are required to state to them
incorrect based on, or materially inconsistent
in an auditor’s report and for no other purpose.
with, the knowledge acquired by us in the
To the fullest extent permitted by law, we do
course of performing the audit. If we become
not accept or assume responsibility to anyone
aware of any apparent material misstatements
other than the Company and the Company’s
or inconsistencies we consider the implications
members as a body, for our audit work, for this
for our report.
report, or for the opinions we have formed.
• The Parent Company financial statements
are not in agreement with the accounting
records and returns; or
• Certain disclosures of Directors’
remuneration specified by law are
not made; or
Financial
statements
Respective responsibilities of Directors
and auditors
As explained more fully in the Statement of
Directors’ Responsibilities, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they
give a true and fair view. Our responsibility is to
audit the financial statements in accordance
with applicable law and International Standards
on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Opinion on financial statements
In our opinion the financial statements:
• We have not received all the information
and explanations we require for our audit.
Contents
• Give a true and fair view of the state of the
Group’s and the Parent Company’s affairs
as at 30 June 2016 and of the Group’s
profit and Group’s and Parent Company’s
cash flow for the year then ended;
• Have been properly prepared in
accordance with IFRSs as adopted by
the European Union;
• The Parent Company financial statements
have been properly prepared in
accordance with IFRSs as adopted by
the European Union and as applies in
accordance with the provisions of the
Companies Act 2006; and
Jonathan Isaacs
Senior Statutory Auditor
For and on behalf of
Jeffreys Henry LLP (Statutory Auditors)
Finsgate 5-7 Cranwood Street
London EC1V 9EE
18 October 2016
40 Consolidated income statement
40 Consolidated statement of comprehensive income
41 Consolidated statement of financial position
42 Company statement of financial position
43 Consolidated statement of changes in equity
44 Company statement of changes in equity
45 Consolidated statement of cash flows
45 Company statement of cash flows
46 Notes to the consolidated financial statements
68 Company information
38
dotdigital Group Plc
Annual Report 2015/2016
dotdigital Group Plc
Annual Report 2015/2016 39
Consolidated income statement
For the year ended 30 June 2016
Consolidated statement of financial position
For the year ended 30 June 2016
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
Profit for the year attributable to the owners of the parent
Earnings per share from continuing operations
(pence per share)
Basic
Diluted
Notes
30.6.16
£’000
30.6.15
£’000
26,926
(3,395)
23,531
(17,367)
6,164
51
6,215
(847)
5,368
5,368
21,366
(2,292)
19,074
(13,858)
5,216
27
5,243
(587)
4,656
4,656
1.83
1.83
1.63
1.61
6
5
6
7
10
10
Consolidated statement of comprehensive income
For the year ended 30 June 2016
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
Notes
30.6.16
£’000
5,368
30.6.15
£’000
4,656
11
3
5,379
4,659
5,379
4,659
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity attributable to the owners of the parent
Called up share capital
Share premium
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 & liabilities
Notes
30.6.16
£’000
30.6.15
£’000
11
12
13
15
16
17
18
18
18
18
18
22
19
609
3,684
1,142
5,435
6,206
17,313
23,519
28,954
1,473
6,138
(4,695)
174
8
20,611
23,709
609
3,444
1,097
5,150
5,328
11,932
17,260
22,410
1,435
5,382
(4,695)
(25)
(3)
16,297
18,391
716
383
4,151
378
4,529
5,245
3,437
199
3,636
4,019
28,954
22,410
The financial statements were approved and authorised for issue by the Board of Directors on 18 October 2016 and were
signed on its behalf by
Milan Patel
Director
Company registration number: 06289659 (England and Wales)
40
41
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016
Company statement of financial position
For the year ended 30 June 2016
Consolidated statement of changes in equity
For the year ended 30 June 2016
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 & liabilities
Notes
30.6.16
£’000
30.6.15
£’000
14
15
16
17
18
18
18
19
5,186
5,186
7,102
639
7,741
12,927
1,473
6,138
174
5,080
12,865
62
62
12,927
5,186
5,186
3,124
166
3,290
8,476
1,435
5,382
(25)
1,534
8,326
150
150
8,476
The financial statements were approved and authorised for issue by the Board of Directors on 18 October 2016 and were
signed on its behalf by
Milan Patel
Director
Company registration number: 06289659 (England and Wales)
42
Balance as at 1 July 2014
Issue of share capital
Share repurchase
Dividends
Share-based payment
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2015
Issue of share capital
Dividends
Share-based payment
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2016
Balance as at 1 July 2014
Issue of share capital
Share repurchase
Dividends
Share-based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2015
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 2016
Called up
share capital
£’000
1,414
21
–
–
–
21
–
–
–
1,435
38
–
–
38
–
–
–
1,473
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
–
–
–
–
–
(4,695)
–
–
–
–
–
–
–
Retained
earnings
£’000
12,211
–
–
(570)
–
(570)
4,656
–
4,656
16,297
–
(1,054)
–
(1,054)
5,368
–
5,368
20,611
Other
reserves
£’000
82
–
(213)
–
106
(107)
–
–
–
(25)
–
–
199
199
–
–
–
Share premium
£’000
5,147
235
–
–
–
235
–
–
–
5,382
756
–
–
756
–
–
–
6,138
Total equity
£’000
14,153
256
(213)
(570)
106
(421)
4,659
3
4,659
18,391
794
(1,054)
199
(61)
5,368
11
5,379
(4,695)
174
23,709
Retranslation
reserve
£’000
(6)
–
–
–
–
–
–
3
3
(3)
–
–
–
–
–
11
11
8
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 foreign subsidiaries into the functional currency of the Group.
The reverse acquisition reserve relates to the adjustment required to account for the reverse acquisition in
accordance with International Financial Reporting Standards.
Other reserves relates to the charge for the share-based payment in accordance with International Financial
Reporting Standard 2 and shares repurchased in the year classified as treasury shares.
43
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Company statement of changes in equity
For the year ended 30 June 2016
Consolidated statement of cash flows
For the year ended 30 June 2016
Balance as at 1 July 2014
Issue of share capital
Dividends
Share repurchase
Share-based payment
Transactions with owners
Loss for the year
Total comprehensive income
Balance as at 30 June 2015
Issue of share capital
Dividends
Share-based payment
Transactions with owners
Profit for the year
Total comprehensive income
Called up
share capital
£’000
1,414
21
–
–
–
21
–
–
1,435
38
–
–
38
–
–
Balance as at 30 June 2016
1,473
Retained
earnings
£’000
2,423
–
(570)
–
–
(570)
(319)
(319)
1,534
–
(1,054)
–
(1,054)
4,600
4,600
5,080
Share
premium
£’000
5,147
235
–
–
–
235
–
–
5,382
756
–
–
756
–
–
Other
reserves
£’000
82
–
–
(213)
106
(107)
–
–
(25)
–
–
199
199
–
–
Total
equity
£’000
9,066
256
(570)
(213)
106
(421)
(319)
(319)
8,326
794
(1,054)
199
(61)
4,600
4,600
6,138
174
12,865
• Share capital is the amount subscribed for shares at nominal value.
• Retained earnings represents the cumulative earnings of the Company attributable to equity shareholders.
• Share premium represents the excess of the amount subscribed for share capital over the nominal value
of the net share issue expenses.
• Other reserves relates to the charge for the share-based payment in accordance with International Financial
Reporting Standard 2 and shares repurchased in the year classified as treasury shares.
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
Sale of tangible fixed assets
Interest received
Net cash flows used in investing activities
Cash flows from financing activities
Equity dividends paid
Share issue
Share repurchase
Net cash flows (used)/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
Company statement of cash flows
For the year ended 30 June 2016
Cash flows from operating activities
Cash generated from operations
Net cash generated from operating activities
Cash flows from financing activities
Equity dividends paid
Share issue
Share repurchase
Net cash flows (used)/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
27
28
28
Notes
27
28
28
30.6.16
£’000
30.6.15
£’000
7,997
(335)
7,662
(1,570)
(502)
–
51
5,667
(263)
5,404
(1,612)
(667)
1
27
(2,021)
(2,251)
(1,054)
794
–
(260)
5,381
11,932
17,313
(570)
256
(213)
(527)
2,626
9,306
11,932
30.6.16
£’000
30.6.15
£’000
733
733
(1,054)
794
–
(260)
473
166
639
584
584
(570)
256
(213)
(527)
57
109
166
44
45
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements
For the year ended 30 June 2016
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 36.
2. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and those parts of Companies Act 2006 applicable to
companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.
The Group has applied all accounting standards and interpretations issued by the International Accountancy Standards
Board and International Accounting Interpretations Committee effective at the time of preparing the financial statements.
New and amended standards adopted by the Group
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after
1 July 2015 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 2015 and have not been early adopted:
Reference
Title
Summary
IFRS 2
Share-based payment
Classification and measurement of
share-based payment transactions
IFRS 7
Financial instruments:
disclosures
IFRS 9
Financial instruments
Deferral of mandatory effective date
of IFRS 9 and amendments to transition
disclosures
Finalised version, incorporating
requirements for classification and
measurement, impairment, general
hedge accounting and derecognition
IFRS 10
IFRS 12
IFRS 14
IFRS 15
Consolidated financial
statements
Amendments regarding the application
of the consolidation exceptions
Disclosure of interest
in other entities
Amendments regarding the application of
the consolidation exceptions
Regulatory deferral
accounts
Original issue of standard
Revenue from
contracts with
customers
Original issue of standard
IFRS 16
Leases
Original issue of standard
IAS 1
IAS 7
Presentation of
financial statements
Amendments resulting from the disclosure
initiative
Statement of
cash flows
Disclosure initiatives
IAS 12
Income taxes
Amendments regarding the recognition of
deferred tax assets for unrealised losses
Application date
of standard
Periods beginning
on or after
1 January 2018
Periods beginning
on or after
1 January 2015
Periods beginning
on or after
1 January 2018
Periods beginning
on or after
1 January 2016
Periods beginning
on or after
1 January 2016
Periods beginning
on or after
1 January 2016
Periods beginning
on or after
1 January 2018
Periods beginning
on or after
1 January 2019
Periods beginning
on or after
1 January 2016
Periods beginning
on or after
1 January 2017
Periods beginning
on or after
1 January 2017
Application
date of Group
1 July 2018
1 July 2015
1 July 2018
1 July 2016
1 July 2016
1 July 2016
1 July 2018
1 July 2016
1 July 2017
1 July 2017
IAS 16
Property, plant and
equipment
Amendments regarding the clarification of
acceptable methods of depreciation and
amortisation
Periods beginning
on or after
1 January 2016
1 July 2016
IAS 19
Employee benefits
Amendments resulting from September
2014 Annual Improvements to IFRSs
IAS 27
Separate financial
statements
IAS 38
Intangible assets
Amendments reinstating the equity method
as an accounting option for investments in
subsidiaries, joint ventures and associates
in an entity’s separate financial statements
Periods beginning
on or after
1 January 2016
Periods beginning
on or after
1 January 2016
1 July 2016
1 July 2016
Amendments regarding the clarification
of acceptable methods of depreciation
and amortisation
Periods beginning
on or after
1 January 2016
1 July 2016
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 the nearest thousand pounds.
Basis of consolidation
In the period ended 2009, the Company acquired via a
share for share exchange the entire issued share capital
of dotmailer Limited, whose principal activity is that of
web- and email-based marketing.
Under IFRS 3 ‘Business combinations’ the dotmailer
Limited share exchange has been accounted for as
a reverse acquisition. Although these consolidated
financial statements have been issued in the name of
the legal parent, the company it represents in substance
is a continuation of the financial information of the legal
subsidiary, dotmailer Limited. The following accounting
treatment has been applied in respect of the reverse
acquisition:
• The assets and liabilities of the legal subsidiary,
dotmailer Limited, are recognised and measured
in the consolidated financial statements at their pre-
combination carrying amounts, without restatement
to their fair value;
• The retained reserves recognised in the consolidated
financial statements for the beginning of the prior
period reflect the retained reserves of dotmailer
Limited to 30 April 2008. However, in accordance
with IFRS 3 ‘Business combinations’ the equity
structure appearing in the consolidated financial
statements reflects the equity structure of the legal
parent dotdigital Group Plc, including the equity
instruments issued under the share exchange to
effect the business combination;
• A reverse acquisition reserve has been created to
enable the presentation of a consolidated balance
sheet which combines the equity structure of the
legal parent with the non-statutory reserves of the
legal subsidiary;
• Comparative numbers are prepared on the
same basis.
The following accounting treatment has been applied
in respect of the acquisition of dotdigital Group Plc:
• The assets and liabilities of dotdigital Group Plc are
recognised and measured in the consolidated financial
statements at their fair value at the date of acquisition.
• The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities
assumed in a business combination are measured
initially at their fair values at the date of acquisition,
irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair
value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If the cost
of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is
recognised directly in the income statement.
Subsidiaries
A subsidiary is an entity whose operating and financing
policies are controlled by the Group. Subsidiaries
are consolidated from the date on which control was
transferred to the Group. Subsidiaries cease to be
consolidated from the date the Group no longer has
control. Intercompany transactions, balances and
unrealised gains on transactions between Group
companies have been eliminated on consolidation.
As a result of applying reverse acquisition accounting
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 its estimates on historical results,
taking into consideration the type of customer, the type
of transaction and the specifics of each arrangement.
46
47
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
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, have a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable future.
Thus they continue to adopt the going concern basis of
accounting in preparing the financial statements. Further
detail is contained in the Directors’ report.
Operating profit
Operating profit is stated after charging operating expenses
but before finance costs.
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 than the carrying amount,
impairment is recognised.
Intangible assets
Intangible assets are recorded as separately identifiable
assets and recognised at historical cost less any
accumulated amortisation. These assets are amortised
over their useful economic lives four to five years, with
the charge included in administrative expenses in the
income statement.
Intangible assets are reviewed for impairment annually.
Impairment is measured by determining the recoverable
amount of an asset or cash generating unit (CGU) which
is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset
or CGU. For the purpose of impairment testing, assets that
cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash
inflows of other assets or 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
technically viable product, the related expenditure
is separately identifiable and there is a reasonable
expectation that the related expenditure will be
exceeded by future revenues. Following initial
recognition, product developments are carried at
cost less any accumulated amortisation and any
accumulated impairment losses. The useful lives of
these intangible assets are assessed to have a finite
life of five years. Amortisation is charged on assets with
finite lives and, until economic benefit can be received
and recognised, this expense is taken to the income
statement and useful lives are reviewed on an annual
basis. Amortisation is charged from the point when the
asset is available for use.
Other development expenditures that do not meet
these criteria are recognised as an expense as
incurred. 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 their 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 for use or resale;
• Management intends to complete the intangible
asset and use or sell it;
• There is an ability to use or sell the intangible assets;
•
It can be demonstrated how the intangible asset
will generate possible future economic benefits;
• Adequate technical, financial and other resource
to complete the development and to use or sell
the intangible asset are available; and
• The expenditure attributable to the intangible asset
during its development can be reliably measured.
•
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the
carrying amounts of its tangible and intangible assets
to determine whether there is any indication that
those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from
other assets, the Group estimates the recoverable
amount of the cash generating unit to which the asset
belongs. An intangible asset with an indefinite useful
life is tested for impairment annually and whenever
there is an indication that the asset may be impaired.
Property, plant and equipment
Tangible non-current assets are stated at historical cost
less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items.
Subsequent costs are included in the assets’ carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
are associated with the item will flow to the Company
and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the
income statement during the financial period in which
they are incurred. Depreciation is provided at the following
rates in order to write off each asset over its estimated
useful life and is based on the cost of assets less residual
value. Significant components of individual assets are
assessed and if a component has a useful life that is
different from the remainder of that asset, that component
is depreciated separately.
Short leasehold:
over the term of the lease
Fixtures and fittings:
25% on cost
Computer equipment:
25% on cost
The assets’ residual values and useful economic lives are
reviewed and adjusted, if appropriate, at each reporting
date. An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable value.
Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount
and are recognised within other (losses) or gains in the
income statement.
Capital risk management
The Group manages its capital to ensure it is able to
continue as a going concern while maximising the return
to stakeholders through the optimisation of the debt and
equity balance. The capital structure of the Group consists
of cash equivalents and equity attributable to the owners of
the parent as disclosed in the statement of changes in equity.
Taxation
The tax expense for the year comprises current and
deferred tax. Tax is recognised in the income statement,
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case,
the tax is also recognised in other comprehensive income
or directly in equity, respectively.
Current tax
Current taxes are based on the results shown in the
financial statements and are calculated according to local
tax rules, using tax rates enacted or substantially enacted
by the balance sheet date.
Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the financial statements.
Deferred income tax assets are recognised to the extent
that it is probable that future taxable profit will be available
against which the temporary difference will be utilised.
Deferred income tax is determined using tax rates that
have been enacted or substantially enacted by the balance
sheet date and are expected to apply when the related
deferred income asset is realised or deferred income tax
liability is settled.
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.
48
49
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
Financial instruments
Financial assets and financial liabilities are recognised on
the statement of financial position when an entity becomes
a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial
assets or financial liabilities at fair value through profit or
loss are recognised immediately in the income statement.
• Financial assets
The Group’s accounting policies for financial assets
are set out below.
Management determine the classification of its
financial assets at initial recognition depending on
the purpose for which the financial assets were
acquired and, where allowed and appropriate,
revaluate this designation at every reporting date.
All financial assets are recognised on a trade date
when, and only when, the Group becomes a party
to the contractual provisions of an instrument.
When financial assets are recognised initially, they
are measured at fair value plus transaction costs,
except for those finance assets classified as at fair
value through profit or loss (‘FVTPL’), which are initially
measured at fair value.
Financial assets are classified into the following
specified categories: financial assets at FVTPL,
‘held-to-maturity’ investments, ‘available for sale’
(AFS) financial assets and loans and receivables.
The classification depends on the nature and purpose
of the financial assets and is determined at the time
of recognition.
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.
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
payable range from 10 to 90 days.
Foreign currency risk
Currency risk is the risk that the holding of foreign
currencies will affect the Group’s position as a result of a
change in foreign currency exchange rates. The Group has
no significant foreign currency risk as most of the Group’s
financial assets and liabilities are denominated in functional
currencies of relevant Group entities. Accordingly, no
quantitative market risk disclosures or sensitivity analysis
for currency risks have been prepared.
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary
economy) that have a functional currency different from
the presentation currency are translated into the
presentation currency as follows:
(a) assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
(b) income and expenses for each income statement
are translated at average exchange rates (unless
this average is not a reasonable approximation of
the cumulative effect of the rates prevailing on the
transaction dates, in which case income and
expenses are translated at the rate on the dates
of the transactions); and
(c) all resulting exchange differences are recognised
in other comprehensive income.
Equity
Share capital is the amount subscribed for shares at
their nominal value.
Share premium represents the excess of the amount
subscribed for the share capital over the nominal value
of the respective shares net of share issue expenses.
Retained earnings represent the cumulative earnings
of the Group attributable to equity shareholders.
The reverse acquisition reserve relates to the adjustment
required by accounting for the reverse acquisition in
accordance with IFRS 3 “Business combinations”.
Other reserves relate to the charge for share-based
payments in accordance with IFRS 2 “Share-based
payments”.
Share-based payments
For equity-settled share-based payment transactions
the Group, in accordance with IFRS 2 “Share-based
payments” measures their value, and the corresponding
increase in equity, indirectly, by reference to the fair value
of the equity instruments granted. The fair value of those
equity instruments is measured at the grant date using the
trinomial method. The expense is apportioned over the
vesting period of the financial instrument and is based on
the number which is expected to vest and the fair value of
those financial instruments at the date of grant. If the equity
instruments granted vest immediately, the expense
is recognised in full.
Functional currency translation
• Functional and presentation currency
Items included in the financial statements of the
Company are measured using the currency of the
primary economic environment in which the entity
operates (functional currency), which is mainly
pounds sterling (£) and it is this currency the financial
statements are presented in.
• Transaction and balances
Foreign currency transactions are translated into the
functional currency using exchange rates prevailing
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of
such transactions and from the translation at the year
end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in
the income statement.
Employee benefit costs
The Group operates a defined contribution pension
scheme. Contributions payable by the Group’s pension
scheme are charged to the income statement in the period
in which they relate.
Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision-maker, who is responsible for allocating resources
and assessing performance of the operating segments as
identified by the Board of Directors.
Critical accounting adjustments
The Group makes certain estimates and assumptions
regarding the future. Estimates and judgments 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 overleaf.
50
51
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
Further detail on the estimates and assumptions we make
in our share-based compensation are included in note 26
to the financial statements. The charge made to income
statement for period is also disclosed here.
(c) Depreciation and amortisation
The Group depreciates short leasehold, fixtures and
fittings, computer equipment and amortises computer
software, internally generated development costs
and domain names on a straight-line method over
the estimated useful lives. The estimated useful lives
reflect the Directors’ estimate of the periods that the
Group intends to derive future economic benefits from
the use of the Group’s short leasehold fixtures and
fittings, computer equipment, computer software,
internally generated development costs and domain
names.
(d) Bad debt provision
We perform ongoing credit evaluations of our
customers and grant credit based upon past
payment history, financial condition and anticipated
industry conditions. Customer payments are regularly
monitored and a provision for doubtful accounts
is established based upon specific situations and
overall industry conditions. Hence the provision
is maintained for potential credit losses based
upon management’s assessment of the expected
collectability of all accounts receivable. In making
this assessment, management take into consideration
(i) any circumstances of which we are aware regarding
a customer’s inability to meet its financial obligations
and (ii) our judgments as to potential prevailing
economic conditions in the industry and their
potential impact on the Group’s customers.
Judgments
(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 judgments:
•
•
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 flow forecasts
which have been discounted at 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 details on the estimates and assumptions
we make in our annual impairment testing of goodwill
are included in note 11 to the financial statements.
At the period end, based on the assumptions, there
was no indication of impairment to the carrying value
of goodwill.
(b) Share-based compensation
Key management believe that there will not be
only one acceptable choice for estimating the
fair value of share-based payment arrangements.
The judgments and estimates that management apply
in determination of the share-based compensation are
summarised below:
•
•
Selection of a valuation model
Making assumptions used in determining
the variables used in a valuation model
i. expected life
ii. expected volatility
iii. expected dividend yield
iv. interest rate.
3. Segmental reporting
The Group’s single line of business is the provision of web-based marketing services. The chief operating decision-maker
considers the Group’s only reportable segment to be by geographical location, this being UK, US and rest of the world
(“RoW”) operations as shown below:
Income statement
Revenue
Gross profit
Profit before income tax
Total comprehensive income attributable to the
owners of the parent
Financial position
Total assets
Net current assets
UK
£’000
22,056
19,298
4,244
3,398
30.6.2016
US
£’000
RoW
£’000
Total
£’000
3,022
2,565
504
539
1,848
1,668
1,467
1,442
26,926
23,531
6,215
5,379
27,410
17,791
1,014
756
530
443
28,954
18,990
Revenue from external customers is attributed to the geographical segments noted above based on the customers’
location. There were no customers who accounted for more than 10% of revenue (2015: None).
Income statement
Revenue
Gross profit
Profit before income tax
Total comprehensive income attributable to the
owners of the parent
Financial position
Total assets
Net current assets
30.6.2015
UK
£’000
US
£’000
RoW
£’000
Total
£’000
18,274
16,676
3,476
2,895
21,591
12,964
1,860
1,602
971
968
819
660
1,232
796
796
796
21,366
19,074
5,243
4,659
–
–
22,410
13,624
In the year ending 30 June 2016, revenue from the US has been disclosed separately as it has exceeded 10% of the
Group’s revenue. The comparatives have thus been re-stated.
4. Employees and Directors
Wages and salaries
Social security costs
Other pension costs
The average monthly number of employees during the year is as follows
Directors
Sales and Marketing
SEO and Product Developers
Administration
30.6.16
£’000
9,667
1,036
243
30.6.15
£’000
7,711
871
221
10,946
8,803
30.6.16
30.6.15
7
100
43
54
204
7
84
48
47
186
During the year the Group also capitalised staff-related costs of £1,338,915 (2015: £1,549,066) in relation to internally
generated development costs.
52
53
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
5. Net finance income
Finance income:
Deposit account interest
6. 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) – note 4
Operating leases: Land and buildings
Operating leases: Other
Audit remuneration
Amortisation of intangibles
Depreciation charge
Legal, professional and consultancy fees
Computer expenditure
Bad debts
Foreign exchange losses
Travelling
Office running
Other costs
Total administration costs
30.6.16
£’000
30.6.15
£’000
51
51
27
27
30.6.16
£’000
1,984
172
1,239
3,395
30.6.16
£’000
10,946
865
48
37
1,330
450
289
1,236
801
(246)
471
174
966
30.6.15
£’000
1,516
415
361
2,292
30.6.15
£’000
8,803
834
44
38
1,159
397
417
828
103
61
351
217
606
17,367
13,858
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
– audit of Company subsidiaries
– non-audit fees: Tax and review of interim accounts
7. Income tax expense
Analysis of the tax charge from continuing operations:
Current tax on profits for the year
Deferred tax on origination and reversal of timing differences
30.6.16
£’000
8
30.6.15
£’000
7
25
4
37
27
4
38
30.6.16
£’000
30.6.15
£’000
514
333
847
262
325
587
Factors affecting the tax charge:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the standard rate of corporation tax in the
UK of 20.75% (2014: 22.50%)
Effects of:
Expenses not deductible
Research and development enhanced claim
Expenditure permitted on exercising options
Overseas tax (profits)/losses
Capital allowances in excess of depreciation
Total income tax
30.6.16
£’000
6,215
1,243
164
(670)
(465)
(15)
257
514
30.6.15
£’000
5,243
1,088
20
(747)
(238)
(46)
185
262
Deferred tax was calculated using the rate 19.75% (2015: 20%). For further details on deferred tax see note 22.
8. Profit/(loss) of Parent Company
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is not
presented as part of these financial statements. The Parent Company’s loss before exceptional items for the financial year
was £4,601,353 (2015: £318,852).
9. Dividends
Amounts recognised as distributions to equity holders in the period.
Final dividend for year end 30 June 2016 of 0.357p (2015: 0.2p) per share
Proposed dividend for the year end 30 June 2016 of 0.84p (2015: 0.36p) per share
30.6.16
£’000
1,054
2,476
30.6.15
£’000
570
1,041
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. The 0.84p is broken down between a general dividend of 0.43p and a
special dividend of 0.41p.
10. 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 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
30.6.16
Weighted
average
number of
shares
Earnings
£’000
Per share
Amount
Pence
5,368 293,095,257
–
977,555
1.83
–
5,368 294,072,812
1.83
There was no difference in the weighted average number of shares used in the calculation of basic and diluted earnings
per share as the effect of notionally dilutive shares were anti-dilutive.
54
55
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016
Notes to the consolidated financial statements continued
For the year ended 30 June 2016
10. Earnings per share continued
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
Weighted average number of shares
Basic EPS
Diluted EPS
11. Goodwill
Group
Cost
At 1 July
At 30 June
Amortisation
At 1 July
Impairment
At 30 June
Net book value
30.6.15
Weighted
average
number of
shares
Earnings
£’000
4,656 284,804,914
–
5,001,766
4,656 289,806,680
30.6.16
Shares
Per share
Amount
Pence
1.63
–
1.61
30.6.15
Shares
293,095,257 284,804,914
294,072,812 289,806,680
30.6.16
£’000
30.6.15
£’000
4,121
4,121
3,512
-
3,512
609
3,512
-
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 amounts of the CGU.
Recoverable amounts for CGUs are based on the higher of value in use and fair value less costs to sell. The recoverable
amounts of the CGU have been determined from value in use calculations. These calculations use pre-tax cash flow
projections based on financial budgets approved by management covering a five-year period. The key assumptions
for the value in use calculations are those regarding discount rates, growth rates, and expected changes in margins.
Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value
of money and the risks specific to the CGUs. 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 is 10%
(2015 – 10%). The valuations indicate sufficient headroom such that a reasonably possible change in key assumptions
would not result in impairment of goodwill.
12. Intangible assets
Group
Cost
At 1 July 2015
Additions
At 30 June 2016
Amortisation
At 1 July 2015
Amortisation for the year
At 30 June 2016
Net book value
At 30 June 2016
Cost
At 1 July 2014
Additions
At 30 June 2015
Amortisation
At 1 July 2014
Amortisation for the year
At 30 June 2015
Net book value
At 30 June 2015
Computer
software
£’000
Internally
generated
development
costs
£’000
Domain
names
£’000
274
88
362
228
36
264
6,625
1,482
8,107
3,227
1,294
4,521
98
3,586
Computer
software
£’000
Internally
generated
development
costs
£’000
274
–
274
195
33
228
5,013
1,612
6,625
2,102
1,125
3,227
46
3,398
16
–
16
16
–
16
–
Domain
names
£’000
16
–
16
15
1
16
–
Totals
£’000
6,915
1,570
8,485
3,471
1,330
4,801
3,684
Totals
£’000
5,303
1,612
6,915
2,312
1,159
3,471
3,444
Development cost additions represents resources the Group have invested in the development of new innovative and
groundbreaking 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 license the use of the platform.
13. Property, plant and equipment
Group
Cost
At 1 July 2015
Additions
At 30 June 2016
Depreciation
At 1 July 2015
Depreciation for the year
At 30 June 2016
Net book value
At 30 June 2016
Short
leasehold
£’000
Fixtures &
fittings
£’000
Computer
equipment
£’000
395
49
444
95
52
147
297
401
47
448
203
90
293
155
1,354
406
1,760
755
315
1,070
Totals
£’000
2,150
502
2,652
1,053
457
1,510
690
1,142
56
57
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
13. Property, plant and equipment continued
15. Trade and other receivables
Group
Cost
At 1 July 2014
Additions
Disposals
At 30 June 2015
Depreciation
At 1 July 2014
Depreciation for the year
Eliminated on disposal
At 30 June 2015
Net book value
At 30 June 2015
14. Investments
Company
Cost
At 1 July and 30 June
Amortisation
At 1 July and 30 June
Net book value
At 30 June
Short
leasehold
£’000
Fixtures &
fittings
£’000
Computer
equipment
£’000
288
107
–
395
47
48
–
95
300
308
93
–
401
112
91
–
203
198
Totals
£’000
1,484
667
(1)
888
467
(1)
1,354
2,150
498
258
(1)
755
657
397
(1)
1,053
599
1,097
Shares in
Group
undertakings
30.6.16
£’000
Shares in
Group
undertakings
30.6.15
£’000
8,705
8,705
3,519
3,519
5,186
5,186
The Group’s or the Company’s investments at the balance sheet date in the share capital of companies include
the following:
Subsidiaries
Nature of business
Class of share
held %:
Proportion of
voting power
dotmailer Limited
Web- and email-based
dotsurvey Limited
marketing
Dormant
dotsearch Europe Limited
Branch company
dotcommerce Limited
doteditor Limited
dotSEO Limited
dotagency Limited
Dormant
Dormant
Dormant
Dormant
dotmailer Inc
Web- and email-based marketing
dotmailer Pty Limited
Web- and email-based marketing
Ordinary
Ordinary A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
All of the above subsidiaries have been included within the consolidated results.
All the above companies with the exception of dotmailer Inc and dotmailer Pty Limited were incorporated in England
and Wales. dotmailer Inc was incorporated in Delaware (US) and dotmailer Pty Limited was incorporated in New South
Wales (Australia).
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
Group
Company
30.6.16
£’000
30.6.15
£’000
30.6.16
£’000
30.6.15
£’000
5,559
(824)
4,735
137
–
–
1,334
6,206
4,589
(343)
4,246
39
–
–
1,043
5,328
–
–
–
–
–
–
-
–
7,080
3,108
9
13
7
9
7,102
3,124
Further details on the above can be found in note 21.
Included within prepayments is an amount of £271,680 (2015: £121,998) in relation to deferred commission which is
considered to be long-term.
16. Cash and cash equivalents
Bank accounts
Further details on the above can be found in note 21.
17. Called up share capital
Allotted, issued, fully paid number
294,784,789 (2015: 287,002,065)
Group
Company
30.6.16
£’000
17,313
17,313
30.6.15
£’000
11,932
11,932
Nominal
value
£0.005
30.6.16
£’000
639
639
30.6.16
£’000
1,473
1,473
30.6.15
£’000
166
166
30.6.15
£’000
1,435
1,435
During the reporting period the Company undertook the following transactions involving the issuing and reclassifying
of issued share capital:
On 17 July 2015 a number of employees exercised their share options increasing the issued share capital
by 1,510,000 shares at a premium price of between 5p and 7.5p.
On 7 August 2015 a number of employees exercised their share options increasing the issued share capital
by 1,200,000 shares at a premium price of between 5p and 7.5p.
On 6 November 2015 a number of employees exercised their share options increasing the issued share capital
by 1,887,397 shares at a premium price of between 5p and 18.15p.
On 20 November 2015 a number of employees exercised their share options increasing the issued share capital
by 1,027,397 shares at a premium price of 18.15p.
On 9 December 2015 a number of employees exercised their share options increasing the issued share capital
by 1,557,930 shares at a premium price of between 5p and 7.5p.
On 6 June 2016 a number of employees exercised their share options increasing the issued share capital
by 600,000 shares at a premium price of between 5p and 18.15p.
58
59
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016
Notes to the consolidated financial statements continued
For the year ended 30 June 2016
18. Reserves
Group
As at 1 July 2015
Issue of share capital
Dividends
Profit for the year
Other comprehensive income: Currency translation
Share-based payment
Balance as at 30 June 2016
As at 1 July 2015
Issue of share capital
Dividends
Profit for the year
Other comprehensive income: Currency translation
Share-based payment
Balance as at 30 June 2016
Group
As at 1 July 2014
Issue of share capital
Share repurchase
Dividends
Profit for the year
Currency translation
Share-based payment
Retained
earnings
£’000
16,297
–
(1,054)
5,368
–
–
Share
premium
£’000
5,382
756
–
–
–
–
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
–
–
20,611
6,138
(4,695)
Retranslation
reserve
£’000
Other
reserves
£’000
Totals
£’000
(3)
–
–
–
11
–
8
Retained
earnings
£’000
12,211
–
–
(570)
4,656
–
–
(25)
16,956
–
–
–
–
199
174
Share
premium
£’000
5,147
235
–
–
–
–
–
756
(1,054)
5,368
11
199
22,236
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
–
–
–
Balance as at 30 June 2015
16,297
5,382
(4,695)
As at 1 July 2014
Issue of share capital
Share repurchase
Dividends
Profit for the year
Other comprehensive income: Currency translation
Share-based payment
Balance as at 30 June 2015
Retranslation
reserve
£’000
(6)
–
–
–
–
3
–
(3)
Other
reserves
£’000
82
–
(213)
–
–
–
106
(25)
Totals
£’000
12,739
235
(213)
(570)
4,656
3
106
16,956
Company
As at 1 July 2015
Issue of share capital
Dividends
Profit for the year
Share-based payment
As at 30 June 2016
As at 1 July 2014
Issue of share capital
Share repurchase
Dividends
Loss for the year
Share-based payment
As at 30 June 2015
19. 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
1,534
–
(1,054)
4,600
–
5,080
Retained
earnings
£’000
2,423
–
–
(570)
(319)
–
Share
premium
£’000
5,382
756
–
–
–
6,138
Share
premium
£’000
5,147
235
–
–
–
–
1,534
5,382
Share-based
payments
£’000
(25)
–
–
–
199
174
Other
reserves
£’000
82
–
(213)
–
–
106
(25)
Totals
£’000
6,891
756
(1,054)
4,600
199
11,392
Totals
£’000
7,652
235
(213)
(570)
(319)
106
6,891
Group
Company
30.6.16
£’000
30.6.15
£’000
30.6.16
£’000
30.6.15
£’000
1,351
–
571
222
710
1,297
4,151
853
–
498
349
574
1,163
3,437
11
4
–
1
–
46
62
30.06.16
Others
£’000
46
39
85
30.06.15
Others
£’000
19
12
31
16
4
–
91
–
39
150
Totals
£’000
420
1,157
1,577
Totals
£’000
251
1,502
1,753
Further details on liquidity and interest rate risk can be found in note 21.
20. Leasing agreements
Minimum lease payments under non-cancellable operating leases fall due as follows:
Within one year
Between two to five years
Within one year
Between two to five years
Land &
buildings
£’000
374
1,118
1,492
Land &
buildings
£’000
232
1,490
1,722
60
Operating leases represent rents payable by the Group for its office properties. Leases are negotiated for an average
term of five years and rentals are fixed on an average of two years with the option to extend for a further five years at the
prevailing market rate at the time.
61
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
21. Financial instruments and risk management
The Group’s activities expose it to a number of financial risks that include credit risk, liquidity risk, currency risk and interest
rate risk. These risks and the Group’s policies for managing them have been applied consistently during the year and are
set out below.
The Group holds no financial or other non-financial instruments other than those utilised in the working operations of the
Group and that listed in this note. It’s the Group’s policy not to trade in derivative contracts.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument rate risk arises, are as follows:
• Trade receivables
• Cash and cash equivalents
• Trade and other payables
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
30.6.16
£’000
30.6.15
£’000
30.6.16
£’000
30.6.15
£’000
6,206
17,313
23,519
1,351
2,800
4,151
5,328
11,932
17,260
853
2,584
3,437
22
639
661
11
47
58
16
166
182
16
130
146
The fair value of the financial assets and financial liabilities is equal to their carrying values. All financial assets are
categorised as loans and receivables and all financial liabilities are categorised as financial liabilities at amortised costs.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and
whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the Group’s Risk Committee. The Board receives
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
Company’s competitiveness and flexibility. Further details regarding these policies are set out below:
Interest rate risk
The Group’s interest rate risk arises from interest-bearing assets and liabilities. The Group has in place a policy of
maximising finance income by ensuring that cash balances earn a market rate of interest offsetting where possible cash
balances, and by forecasting and financing its working capital requirements. As at the reporting date the Group was not
exposed to any movement in interest rates as it has no external borrowings and therefore is not exposed to interest rate
risk. No sensitivity analysis has been prepared.
The Group’s working capital requirements are managed through regular monitoring of the overall cash position and
regularly updated cash flow forecasts to ensure there are sufficient funds available for its operations.
Liquidity risk
The Group’s working capital requirements are managed through regular monitoring of the overall position and regularly
updated cash flow forecasts to ensure there are funds available for its operations. Management forecasts indicate no new
borrowing facilities will be required in the upcoming financial period.
Trade and other payables of £2,283,000 (2015: £2,365,000) 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 2016 there were no significant debts past their due period which had not been provided for. The maturity of the
Group’s trade receivables is as follows:
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
Provision for impairment
Receivable written off in the year
Unused amount reversed
As at 30 June
30.6.16
£’000
2,795
1,243
1,521
5,559
30.6.15
£’000
2,311
813
1,465
4,589
30.6.16
£’000
30.6.15
£’000
6
87
731
824
2
2
339
343
30.6.16
£’000
30.6.15
£’000
343
789
(259)
(49)
824
336
103
(47)
(49)
343
The Group minimises its credit risk by profiling all new customers and monitoring existing customers of the Group for
changes in their initial profile. The level of trade receivables older than the average collection period consisted of a value of
£1,541,197 (2015: £1,486,597) of which £730,350 (2015: £339,962) was provided for. The Group felt that the remainder
would be collected post year end as they were with longstanding 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
rating bodies. The majority of the Company’s cash holdings are held at NatWest Bank which has an BBB+ credit rating.
The carrying value of both financial assets and liabilities approximates to fair value.
Capital policy
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to
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 (2015: £nil) and amounts payable over one year are nil
(2015: £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.
62
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Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
22. Deferred tax
As at 1 July
Current year provision
The deferred tax liability above comprises the following temporary differences:
Capital allowances in excess of depreciation
R&D relief in excess of amortisation
Share option relief
30.6.16
£’000
30.6.15
£’000
383
333
716
58
325
383
30.6.16
£’000
30.6.15
£’000
91
708
(83)
716
103
679
(399)
383
Deferred tax provision relates to taxes to be levied by the same authority on the same entity expected to be settled at the
same time. As such deferred tax assets and liabilities have been offset.
23. Capital commitments
The Company and Group have no capital commitments as at the year end.
24. Related party disclosures
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
Group
The following transactions were carried out with related parties:
Sale of services
Redstone Connect Plc
Entity under common directorship
Cadence Performance
Entity under common directorship
Email marketing
services
Email marketing
services
30.6.16
£’000
30.6.15
£’000
–
2
2
4
3
7
Sales of services are based on the price lists in force and at terms that would be available to third parties:
Purchase of services
Barratts of Old Ltd
Entity under common directorship
Consultancy services*
30.6.16
£’000
30.6.15
£’000
–
–
8
8
* Consultancy services to assist with the international expansion and development of channel sales strategy.
Directors
Aggregate emoluments
Ex-gratia payment
Company contributions to money purchase pension scheme
Share-based payments
Information in relation to the highest paid Director is as follows:
Salaries
Ex-gratia payment
Other benefits
Pension costs
Share-based payments
The highest paid Director did not exercise any share options in the year (2015: 660,000).
Company
The following transactions were carried out with related parties:
Year end balances arising from sales/purchase of services
dotmailer Limited
Subsidiary
Payables
30.6.16
£’000
858
137
46
114
30.6.15
£’000
1,002
–
60
20
1,155
1,082
30.6.16
£’000
183
137
3
–
114
437
30.6.15
£’000
234
–
11
15
20
280
30.6.16
£’000
30.6.15
£’000
(5,338)
(5,338)
(3,280)
(3,280)
The receivables and payables are unrestricted in nature and bear no interest. No provisions are held against receivables
from related parties.
Loans to related parties
Year end balances arising from sales/purchase of services
dotmailer Limited
Subsidiary
Loans advanced
Loans repaid
30.6.16
£’000
30.6.15
£’000
6,388
6,069
(40)
5,681
751
(44)
12,417
6,388
64
65
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Notes to the consolidated financial statements continued
For the year ended 30 June 2016
25. Ultimate controlling party
There is no ultimate controlling party of the Group. dotdigital Group PLC acts as the Parent Company to dotmailer
Limited, dotsearch Europe Limited, dotmailer Inc, dotmailer Pty Limited, dotagency Limited (Dormant), dotsurvey Limited
(Dormant), dotSEO Limited (Dormant), dotcommerce Limited (Dormant) and doteditor Limited (Dormant).
26. 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 £199,600
(2015: £106,000).
Vesting conditions of the options dictate that employees must remain in the employment of the Group for the whole
period to qualify.
Movement in issued share options during the year
The table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during
the period. The options outstanding at 30 June 2016 had a WAEP of 29.69p (2015: 14.43p) and a weighted average
contracted life of 3.2 years (2015: 2.1 years) and their exercise prices ranged from 0p to 44.50p. All share options are
settled in form of equity issued.
30.06.16
30.6.15
No of options
WAEP
No of options
Outstanding at the beginning of the period
10,938,790
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
1,439,029
491,066
7,782,724
4,104,029
1,063,409
14.83p
29.02p
21.46p
10.22p
26.69p
8.00p
13,923,790
2,275,000
1,040,000
4,220,000
10,938,790
8,462,724
WAEP
8.82p
29.53p
16.56p
6.06p
14.43p
10.44p
The weighted average share price at the date of the exercise for share options exercised during the period was 40.32p
(2015: 30.52p).
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 options/
warrants
20 June
2016
26 April
2016
25 November
2015
10 April
2015
28 November
2014
18 October
2013
423,409*
206,460
809,160
750,000
1,525,000
3,554,794
44.25p
£nil
5 years
1.33%
30%
1.7%
29.26p
45.00p
44.50p
5 years
1.33%
30%
1%
7.23p
40.50p
40.25p
5 years
1.33%
30%
1%
6.46p
31.50p
31.50p
5 years
1.33%
30%
0%
5.64p
29.00p
28.50p
5 years
1.35%
30%
0.%
5.33p
17.82p
18.25p
5 years
1.40%
30%
0.4%
3.31p
Expected volatility was determined by calculating the historical volatility of the Group’s share price from the date it listed
to the grant date of the share option. The expected life used in the model is based on management’s best estimate, for
the effects of non-transferability, exercise restrictions and behavioural considerations.
* The share options issued on the 20 June 2016 were to Simone Barratt as part of her remuneration package during
her time as CEO of the Group and were based on her achieving certain performance criteria. These share options
were granted as an unapproved share option scheme at a £Nil exercise price and were released immediately, upon
her being a good leaver as per the share option scheme agreed at the AGM on 15 December 2015.
27. Group reconciliation of profit before corporation tax to cash generated from operations
Current
Profit before tax from all operations
Currency revaluation
Depreciation
Loss on disposal of fixed assets
Share-based payments
Finance income
(Increase)/decrease in trade receivables
Increase/(decrease) in trade payables
Cash generated from operations
Group
Company
30.6.16
£’000
30.6.15
£’000
30.6.16
£’000
30.6.15
£’000
6,215
11
1,787
–
199
(51)
8,161
(878)
714
7,997
5,243
3
1,556
(1)
106
(27)
6,880
(1,666)
453
5,667
4,600
(319)
–
–
–
199
–
4,799
(3,978)
(88)
733
–
–
–
106
–
(213)
721
76
584
28. Group cash and cash equivalents
The amounts disclosed in the statement of cash flow in respect of cash and cash equivalents are in respect of these
statements of financial position amounts:
As at 1 July 2014
As at 30 June 2015
As at 30 June 2016
Group
£’000
9,306
11,932
17,313
Company
£’000
109
166
639
29. Project development
During the period the Group incurred £1,482,558 (2015: £1,611,929) in development investments. All resources utilised in
development have been capitalised as outlined in the accounting policy governing this area.
30. Post balance sheet events
There are no post balance sheet events which impact the Group’s financial statements.
66
67
Financial statementsdotdigital Group PlcAnnual Report 2015/2016dotdigital Group PlcAnnual Report 2015/2016 Company information
For the year ended 30 June 2016
Directors:
S Bird
I Taylor
R Kellett-Clarke
F Beechinor-Collins
M Patel
P Simmonds
Company Secretary:
M Patel
Auditors:
Jeffreys Henry LLP
Statutory Auditor
Finsgate 5-7 Cranwood Street
London
EC1V 9EE
Registered office:
No. 1 London Bridge
London
SE1 9BG
Registered number:
06289659 (England and Wales)
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 Plc
Annual Report 2015/2016
69
dotdigital Group PlcAnnual Report 2015/2016 www.dotdigitalgroup.com
70
dotdigital Group PlcAnnual Report 2015/2016