Annual Report
2018/2019
Financial statements
48 Consolidated income statement
48 Consolidated statement of comprehensive income
49 Consolidated statement of financial position
50 Company statement of financial position
51 Consolidated statement of changes in equity
52 Company statement of changes in equity
53 Consolidated statement of cash flows
53 Company statement of cash flows
54 Notes to the consolidated financial statements
80 Company information
Contents
Strategic report
2 Chairman’s report
4
Empowering customers with intelligent
tools and people
Investment case
6
8 Thoughts of the Chief Executive Officer
9 Key Performance Indicators
10 Case study – Tottenham Hotspur
12 Chief Executive Officer’s report and
financial review
20 Case study – icelolly.com
22 Risks, impact and mitigations
26 Corporate social responsibility report
Governance
28 Board of Directors
30 Corporate governance report
33 Audit Committee report
34 Remuneration Committee report
39 Report of the Directors
42 Report of the independent auditor
Corporate statement
Engagement Cloud is the SaaS platform of dotdigital Group Plc
(LSE: DOTD). It’s the platform of choice for businesses seeking to
engage customers across all touchpoints. The platform’s features
empower 4,000+ brands across 150 countries to acquire, convert,
and retain customers. Users can connect customer data, surface
powerful insights, and automate intelligent messages across
email, SMS, social, and many more.
£51.3m
Revenue
h 19% from £43.1m
£11.8m
Adjusted operating
profit
h 25% from £9.4m*
3.93p
Adjusted basic
earnings per share
h 33% from 2.95p*
£19.3m
Cash position
h 29% from £15.0m
* Adjusted for continuing operations.
1
Chairman’s report
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Tink Taylor
Interim Chairman
This has been another year of strong financial performance
and operational success. It has been built on the foundation of
the businesses’ three core pillars of growth, product innovation,
geographic expansion and strategic partnerships.
This year we have seen revenues grow from £43.1m in 2018 to
£51.3m. Adjusted operating profit also increased in the period
from £9.4m in 2018 to £11.8m from continuing operations in
2019. Combined with a heathy balance sheet, our cash reserves
now stand at £19.3m, up from £15.0m in 2018 and there is no
significant debt in the business.
The business continues to deliver double digit organic growth
in all regions. With average revenue per user (ARPU by customer)
continuing to rise, as do overall numbers. Further traction has
been made in our international efforts with sales growing by
83% in APAC and 27% in the US.
To support the international growth, the operational board
has been restructured to allow for additional appointments of
General Managers in both the EMEA and US regions to augment
the General Manager already in place within the APAC region.
Equally, additional support has been brought into the operational
board in areas such as marketing, product, and IT systems.
This coincides with additional hires and office openings in
areas such as Los Angeles and Singapore, with the Netherlands
opening soon.
This year saw a significant shift in how the business marketed
itself following a major rebrand of the business from dotmailer
to dotdigital. As a continuation, the platform is now known as
‘Engagement Cloud’ following the successful integration of the
technology that enables the platform to send messages on
other channels beyond email, which was acquired as part of the
Comapi deal completed in late 2017.
Having the word ‘mail’ in the name of the business simply
did not reflect the product innovation and all its capabilities.
The rebranding process was rolled out seamlessly. Whilst it
was not a substantial change, it has achieved its goal.
Marketers and partners alike were keen to understand the
reason for the change and went away with a full understanding
of the platform becoming a truly cross-channel marketing
automation platform.
Not only has the platform transformed into a cross-channel
marketing automation platform, innovations have also been
made to further enhance the Artificial Intelligence and Machine
Learning capabilities. This was demonstrated with the recent
launch of commerce intelligence tools, which allows our
customers to more accurately predict, select and market to
the right channels. This in turn has resulted in helping to drive
revenues for their own customer base. Consequently, we
have seen a continued increase in revenues from additional
functionality and messaging capabilities, especially when
factoring in the ‘mobile first’ demand we see in Asian markets.
This year has also seen the continued deepening relationships
with our core strategic partners. Post the acquisition of Magento
Commerce by Adobe, we have seen revenues increase through
this channel. This is primarily as a result of our Core Bundled
Extension which sees dotdigital’s Engagement Cloud embedded
into the Magento 2 core code, which can be enabled by the
flick of a switch. Combined with this we have also been seeing
additional traction in the e-commerce space through our
strategic partnerships with other e-commerce platforms. As we
progress into next year additional resources have already been
recruited to grow our CRM strategic partnerships, particularly in
the Microsoft Dynamics space.
I am delighted to say that our global user conference the
‘dotdigital Summit’ continues to blossom with attendance up
15% this year. The event has now moved from one-day to a two-
day conference to facilitate a partner day dedicated to numerous
agencies and system integrators that we partner with around
the globe. This goes hand in hand with the significant increase
in localised educational events staged for our customers,
prospects and partners in all regions of the world. The marketing
team has already begun actioning this year’s marketing plan
which includes a significant increase in investment for our
overseas operations.
The Board proposes a dividend of 0.67p per share, an increase
from last year when the dividend was 0.64p per share.
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Another year of strong financial
performance and success
operationally
The Nominations Committee continues to evaluate the balance
of the Board going forward.
The Board carries out an evaluation of its performance annually,
taking into account the Financial Reporting Council’s Guidance
on Board Effectiveness.
Outlook
The outlook for the business is positive as is it well placed to
take advantage of the continued growth within the marketing
automation market, which is predicted to grow to $25.1bn by
2023 according to Forrester Research. Given the rebrand and
repositioning as a cross-channel marketing automation platform
combined with aligning itself further to AI-driven and Machine
Learning capabilities, the business has every opportunity
for continued growth. This is strengthened by its deepening
strategic partnerships in the e-commerce and CRM sectors.
We continue to monitor the market for additional acquisition
opportunities in this space that will enhance our geographical
footprint and enhance our technical resources and capabilities.
As a result, we foresee another strong year ahead.
Tink Taylor
Interim Chairman
15 October 2019
This year the focus is on maximising the opportunities following
our rebranding and repositioning as a cross-channel marketing
automation platform. This enables us to offer our platform
and services to a broader spectrum of clients and upsell our
newer functionalities to our existing clients. We will continue
to look for growth from our existing overseas operations and
identify opportunities for growth outside of our existing areas
of operation.
The dotdigital team, often referred to as dotfamily, has continued
to expand whilst retaining its culture of being enthused, highly
skilled and highly motivated. This is complemented by our
operational board driven by our Chief Executive Officer, Milan
Patel. I would like to thank them all for their hard work and
endeavours over the last year and the continued success they
will bring to dotdigital moving forward.
Corporate governance
This year saw Frank Beechinor-Collins step down as Non-
Executive Chairman and Peter Simmonds step down as a
Non-Executive Director, I would like to take this opportunity to
thank them for their service and help in driving the business
over the years.
Richard Kellett-Clarke also stepped down as temporary Non-
Executive Chairman for personal reasons, again I would like
to thank Richard for his service. As a result, I was appointed
temporary Non-Executive Chairman on 3 April 2019.
In order to fully comply with the QCA Code, the Nominations
Committee has been busy working hard shortlisting and
interviewing several candidates to fulfil the roles of Non-
Executive Chairman and Non-Executive Directors. In parallel
with these efforts an external agency has recently been
deployed to assist with this task and to run all those shortlisted
through the same rigorous process.
As part of this process we formally appointed Boris Huard as
a Non-Executive Director on 26 March 2019. Boris comes with
significant corporate and marketing experience and big data
knowledge, most recently at Experian.
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Empowering customers with intelligent tools and people
dotdigital Engagement Cloud empowers multidisciplinary
teams to plan, test, execute, and optimize cross-channel
marketing campaigns. We empower 4,000+ brands across
150 countries and help marketers connect with their target
audience at scale, through engaging messages that drive
significant customer value.
What does Engagement Cloud do?
Engagement Cloud is a SaaS-based cross-channel marketing
automation platform that enables aspiring global brands to send
data-triggered campaigns and communications across channels
such as email, SMS, social, push and more. Our technology
integrates with key existing e-commerce and CRM platforms
to create a powerful and robust marketing engine that supports
key insight-driven activities and supercharges business growth.
How do we empower marketers?
We empower marketers by making data accessible to them.
Data sits at the heart of our platform because it’s the key
in unlocking every single valuable engagement. Users can
personalize, segment, and automate revenue-generating
campaigns in minutes with easy, time-saving tools. We help
marketers scale quickly to maximize the returns of every
channel, such as email which has a return on investment
of £42/$51 for every £1/$1 spent.
Why do customers choose dotdigital?
We want our customers to be confident in knowing that our
platform is future-proof. Our technology is market leading,
and our product managers are passionate about enhancing
Engagement Cloud to make it the best choice for aspiring
marketers. We are attentive towards customer feedback and
industry practice; together they help shape our platform’s and
customers’ future.
Service is integral to our customers’ delight. We know that
sometimes it is easier to outsource tasks when there aren’t
enough hands on deck. Our experienced professional services
team is always on hand to lend a hand; we design, code and
build automated campaigns for global brands every day.
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I can honestly say that the platform is excellent.
It’s simple to use, packed with great (and
constantly evolving) functionality and its
modular nature makes it very flexible. Perhaps
more importantly, I’ve found the team super-
accommodating and incredibly helpful.
Ben Scholes
CarShop
Engagement Cloud
Connecting data to channels
via intelligent tools
Data
Our addressable market
increases with quality and
quantity of data inputs
Empowerment layer
Better control and use of data combined with smart features
helps customers achieve their desired outcomes
Channels
Increased number of
outputs maximises the
usefulness and reach
Other CRM systems
Other e-commerce
Integrations
Data capture
Features
Our fast and easy-to-use features enable
advanced marketing
Email
SMS
Social
Ads
Mobile
Website
Chat
Offline
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Investment case
dotdigital is a leading, global, cross-channel,
SaaS and marketing automation platform,
that enables our clients to communicate
with their customers at the right time, with
the right message, to the right person through
the right channel.
Strategy
Scalable
Growth
Clear and compelling strategy
Highly scalable platform and
predictable financial model
Attractive industry growth
Focused on two complementary
Software sold as a service
Email marketing automation has a
markets – e-commerce and B2B
Rapid product innovation
supporting up and cross-sell
opportunities
Predictable and transparent
financial model
Very diverse customer base with
no customer accounting for more
International growth based on
than 1% of revenue
proven blueprint
Profitable with significant cash
Brand success extended through
balances
global strategic partners
86% recurring revenues
proven superior ROI for marketers
Global marketing automation
spend, according to Forrester
Research, is growing at double
digit and predicted to be $25.1bn
by 2023
Marketers are predicted to send
more emails in next five years
complemented with cross-channel
Strong contracted revenues
features
New messaging channels as
customers create cross-channel
experiences
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Independence
Leadership
Outlook
The successful dotdigital culture
Experienced management team
Strong growth outlook
Highly talented and motivated
Executive team with proven track
Innovation to support marketing
people focused on customer
record of success
move to cross-channel and
success
Non-Executive Board steeped in the
artificial intelligence
Creative marketing approach to
marketing automation story
Ability to supplement with sensible
empower customers
Wider management team with
technology acquisitions
Flexible, extendable and effective
the motivation to continue the
Attract further world-class partners
product that drives retention and
profitable growth story
to increase the addressable market
beats the competition
All employees aligned to the
New geographical markets with
Unique industry position with many
strategic priorities of geographic
greater potential than UK alone
competitors distracted
growth, product innovation
and building strong strategic
partnerships
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Thoughts of the Chief Executive Officer
“
Continuous progress against our
framework for growth.
By strengthening the foundations of the business, both from
a platform and people perspective, this has set up a strong
position for us to take up opportunities that arise for long-term
growth. This will be achieved via a combination of leadership
training and development programmes to support the growth
of our people. Therefore, I can only feel confident about the
business’s future and the direction we are traveling in. This year
also saw the opening of additional offices in Singapore and Los
Angeles as we continue to work with our partners within these
regions to help expand market share in Asia and the US.
With all these changes that have occurred in the year, our
focus remains on three key themes across the whole business:
‘Focus’ on our growth pillars; ‘Simplicity’ in our offering; and
‘Empowerment’ of our employees and partners.
Although there was a slight slowdown in organic growth in
the EMEA region, growth remained double digit, during a time
of macro-economic uncertainty where our customers were
embedding key regulation changes and implementing the data
privacy policies. However, our international organic growth
accelerated in the year, bringing with it both substantial and
commendable growth across all our international regions.
I hope that you enjoy reading more about our strategic progress
in this annual report.
It is with great pleasure that I share with you my thoughts on
the past 12 months. In a time of market uncertainty, we have
welcomed innovation through continued development and
investment, the move to cross-channel messaging following
the full integration of Comapi and implementing new ways of
working and scaling up across all our regional hubs. This has
set the foundation for our future growth.
We have continued to deliver on my vision of expanding our
geographic footprint and increasing our addressable market
through the integrations we built into our key strategic partners.
Following the acquisition of Comapi in 2017, over the past 12
months we have successfully completed the incorporation of
the people into our company culture and the full integration
of all functionality into the Engagement Cloud. As a direct
consequence of this, it has now enabled us to fully focus on
our high margin core Engagement Cloud offering by way of
discontinuing the low margin wholesale SMS business, which
was the heritage of Comapi.
We have persisted with our goal of optimising both our sales
and customer success processes, listening to feedback from
our customers, investing in high calibre people to support all
their needs, educating our customers on GDPR and building
functionality within the platform that assists customers with
their compliance. The platform has evolved to be the best-of-
breed player within the data-driven, cross-channel, marketing
automation space and continues to empower our customers
on creating experiences with all their recipients.
Strong progress has been made through our continuous
investment in our international hubs, from the addition of
people in region to support our customers by addressing all
their requirements. This has occurred alongside investing and
strengthening relationships with our key strategic partners in
both the e-commerce and CRM space. In addition, we have
started the process of creating management bandwidth and
solidifying the foundations in the regions by hiring General
Managers who are responsible for regional decision making,
thereby allowing us to quickly scale up.
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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 which is set by the Board at the start
of every year. Employee remuneration is specifically
linked to these KPIs.
Financial
Revenue (continued)
We aim to deliver double-digit
organic revenue growth from
continuing operations.
%
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Cash position
We aim to have a strong
cash position.
Adjusted operating profit (continued)
We aim to have double-digit
adjusted operating profit growth
from normal business.
.
m
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2017
2018
2019
2017
2018*
2019
2017
2018
2019
Strategic**
ARPU
We aim to continue to grow Average
Revenue Per User (ARPU).
Recurring revenue
We aim to have recurring revenues
of over 70%.
International
We aim to expand revenue from
outside the UK.
%
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9
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3
2
2017
2018
2019
2017
2018
2019
2017
2018
2019
* after spending £10.7m on the acquisition of Comapi, paid in full using cash resources.
** continuing only.
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Case study
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Driving life-long loyalty with
hyper-personalised automation
Tottenham Hotspur is a world-famous professional football club based
in North London that competes in the Premier League. Founded in
1882, the club is synonymous with playing entertaining football, which,
together with a history of success on the pitch, has enabled it to build a
truly global fan base with millions of fans around the world.
Off the pitch, the club has a strong and successful business
model centered around building a platform for long-term
success, which includes a new world-class stadium.
The club always aims to provide fans, members, and partners
with unforgettable digital experiences. With email as the key
channel for ticketing and membership, as well as partner, retail,
and soccer school operations, finding a platform powerful
enough to meet the club’s high demands was crucial.
Challenge
Arriving through multiple sources, supporters and followers that
enter the club’s database can be volatile, with initial engagement
often difficult to achieve. They can also arrive in high volumes at
different times throughout the season or pre-season periods.
Tottenham Hotspur needed to create a strong first impression
to capitalise on these early opportunities. This meant choosing
a platform that had the power to handle vast quantities of data
and deliver tailored customer journeys from the very beginning.
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W I N N E R
Solution
The welcome program was immediately identified as being
essential.
Tottenham Hotspur’s previous welcome program delivered
an open rate anywhere between 5% and 20%, and fans who
failed to open would then be classified as unengaged. As a
result, they would not receive soft-sell campaigns such as
weekly newsletters.
To maximise this opportunity, Tottenham Hotspur launched a
strategic two-month program, specifically designed to engage
unopened welcome emails. The new program offered fans
six additional opportunities to open emails before they were
categorized as completely unengaged.
To guarantee the success of this new program, the Club utilised
Engagement Cloud’s dynamic personalisation capabilities to
spur a highly emotive response from their audience. Combining
attention-grabbing subject lines with hyper-personalised images
in the email body, Tottenham Hotspur wanted to create an
extra-special bond with fans, no matter how they entered the
database.
233% increase in retail
revenue attributed
to email campaigns.
Results
Introducing hyper-personalised content was a game changer.
Triggered once fans entered the database, the improved
welcome program enjoyed a consistent open rate of 36%
since launch. The number of engaged fans has exceeded
expectations, meaning Tottenham Hotspur is now retaining
the 20% of recipients it was losing as part of the previous
welcome program.
Thanks to this boost in fan retention, the brand’s mailing list
for soft-sell campaigns has grown, leading to a massive 233%
increase in retail revenue attributed to these email campaigns.
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Chief Executive Officer’s report and financial review
Milan Patel
Chief Executive Officer
Key Highlights
30.6.19
(£m)
30.6.18
(£m)
%
Increase
Group Revenue
(Continued & Discontinued)
Revenue (Continued)
51.3
42.5
Adj. operating profit (Continued)
11.8
Adj. EBITDA (Continued)
Net Assets
Adj. Basic EPS (p) (Continued)
Cash
14.7
41.5
3.93
19.3
43.1
36.9
9.4
11.8
36.6
2.95
15.0
19%
15%
25%
24%
13%
33%
29%
Operational Review
Total revenue increased by 19% to £51.3m, however this
includes the discontinued operations of the business. Organic
revenue growth from the core business (‘continuing operations’)
remained strong at 15%, taking revenue to £42.5m from £36.9m
in 2018. This was as a direct consequence of higher value
new client wins, a strong level of customer sign-ups, ability
to continually monetise advanced features and additional
marketing channels adopted by existing clients. This was
evident by revenues from enhanced functionality and monthly
recurring license fees now achieving £12.4m, a significant
increase of 39%.
We have also seen substantial progress in the international
markets, with revenues outside of the UK market, excluding
discontinued operations, growing by 28% and now representing
29% of Group revenues. The focus on international revenues
continues as international expansion remains a core pillar in
our overall organic growth strategy and the Group continues
to invest in key geographies.
During the year, dotdigital Engagement Cloud’s average revenue
per user (ARPU) rose by 14% to £966 per month. This was the
result of continued focus on mid-market and enterprise clients
plus customers that use the Magento integration, who on
average spend over £1,500 per month. Overall the volume of
messages sent out by the platform increased by 11% to 16.0bn
from 14.4bn in 2018, reflecting the change in demographic and
increasing both the recurring revenue growth and ARPU. We now
have circa. 86% of group revenues are now recurring, of which
90% is contracted giving good visibility on revenues.
The cash position of the Group, £19.3m at year end, remains
strong with no significant debt in the business, thereby allowing
us to make strategic decisions to deploy cash where we see
increased returns from either further investing in our organic
growth pillars or earnings enhancing acquisitions.
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Market
The marketing automation market is set to expand to $25.1bn
by 2023 according to Forrester Research. Currently email
marketing automation represents c.30% of the global market,
closely followed by other channels such as mobile application
marketing and social media marketing. According to Forrester
Research, email marketing is anticipated to dominate the
marketing automation market, due to the increased adoptions
of digitalisation and the channel’s status as a relatively low cost
but effective marketing method.
North America, Europe and Asia is expected to lead the way with
the fastest growth forecasted to be in these markets. The Group
currently has three separate hubs that mirror each market, with a
user interface translated into multiple languages and a scalable
infrastructure that has in-region data processing and storage
to mirror these growth areas. The Board believes the Group is
therefore well placed to capture market shares in these areas.
Geographic Progress
EMEA
EMEA saw revenue growth for continued operations of 10% in
the year from £30.4m to £33.5m. We still see strong double-digit
growth from the region despite the ongoing impact of GDPR in
the first half of the financial year. Message volume growth has
also moved closer to the levels seen prior to the introduction of
the new legislation in Europe.
The continued focus on the Nordics and Benelux region, has
resulted in stronger partnerships and a growing revenue stream
in the area. Brand awareness continues to be achieved in the
market within the e-commerce space through integrations into
our partners’ platforms. We have begun to investigate hiring
local people in the region in addition to opening an office in the
Netherlands to support our customers and partners in these
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A Global Company
USA & Canada
New York
USA & South America
Los Angeles
UK
London, Cheltenham, East
Croydon and Manchester
Europe
Minsk and Warsaw
Asia
Singapore
Africa
Cape Town
Australia
Melbourne
Australia
Sydney
geographies. The Benelux market has seen the strongest
revenue growth outside of the UK as our strategic partners
are also seeing their strongest growth.
The majority of Comapi’s clients operate within the UK market
and following the decision that both Dynmark and Donky
businesses were non-core to the Group’s operations, this
business will be wound down. A small team now remains
in place to support the current clients and partners.
North America
Our North American region revenue showed strong organic
growth. Revenue grew 27% to $9.0m from $7.1m following
strong collaborations with our strategic partners and system
integrators and further raising brand awareness in the market,
which has significantly enhanced this growth. Our aim to support
our customers and partners in region was strengthened through
the increased investment in people and through the new offices
opened on both the West and East Coast to support their needs.
In H2, the region also saw deeper partnerships relations and
additional investment via marketing, in our Microsoft Dynamics
Connector, which enabled us to increase the addressable market
in North America. In order to scale up the hub in region we have
accelerated our search for a General Manager to provide both
local experienced leadership and quicker decision making.
APAC
The APAC region saw the fastest growth of 83%, ahead of
management expectation, albeit from a smaller base, growing
from AUS$2.1m to AUS$3.8m. This was due to higher order
values and customer numbers won in the year. Traction
continues to be gained in the Far East through our presence
in Singapore which is still a relatively new market for the Group.
The addition of mobile functionality added to our core offering
has helped increase the pipeline for these services, which
typically tend to be a more mobile-first approach. We continue
to enhance our relationships with the channel partners in region,
thereby assisting us in improving sales conversion rates.
Product Innovation
It is our ambition to be the world’s best data-driven marketing
and customer engagement platform and we are therefore
continually investing in developing new technology. We plan
on scaling the platform and adding new features across
all regions.
Our concentration remains on e-commerce companies which
currently represents 50% of our customer base. During the year
we have enhanced our commerce intelligence functionality
though the introduction of RFM (Recency, Frequency and
Monetary) reporting, together with automated segments, which
are both easy to use and provide increased value and insights
around their data in the platform. Further improvements were
also made to Artificial Intelligence (“AI”) and Machine Learning
(“ML”) for our product recommendations. In addition, an affinity
finder solution has been built that will be launching soon, as
part of our commitment to infuse the platform with AI and ML.
The key differentiator with our algorithms is that it uses the
customer’s data to enhance the return on investment as opposed
to having a generic algorithm which may not work.
Post the addition of an integrated cross-channel messaging
service, we have made notable progress in customers using
more than one channel in their marketing campaigns. New
channels outside of email now include push messaging, chat,
SMS, RCS (Rich Communication Service) plus other messaging
services such as Facebook Messenger, Twitter DM and
WhatsApp to name but a few.
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“
dotdigital is an absolute breath of fresh air, we needed a
flexible platform that allowed us to access the power held
within our data; simply, quickly and effectively. My team left
their onboarding session with beaming smiles and enthusing
wildly about the functionality, ease of use and hugely excited
how we can use it to drive our programme forward.
Richard Jones
T.M. Lewin
By using this enhanced offering, our customers can now use
the data they import into the platform to stay relevant and
personalise, thereby leading them to target the right person, with
the right message, at the right time, through the right channels.
Recurring revenue from enhanced product functionality and
upgrades, taken by both our existing and new customers, has
increased by 39% compared with the same period last year.
This shows that not only is the platform adoption increasing
but marketeers are placing greater value in data and are
becoming more sophisticated in their marketing strategies.
We are therefore confident that we will continue to see an
increase in the adoption of what we have built to date, including
the new innovative features we are adding. The strongest
adoption was the use of templates of drip programs to automate
customers’ marketing.
Therefore, we expect to see this increasing as we continue to
monetise our development efforts and place greater value in
the functionality. Enhanced product functionality now represents
34% (2018: 28%) of the recurring Group revenues.
Strategic partnerships
Revenue from customers using our Magento integration grew
27% from £9.3m to £11.8m and brand awareness remains strong
in this space. All new customers Magento adds to their own
platform ships with dotdigital Engagement Cloud pre-installed,
and all that is needed is to sign a contract with dotdigital to get
started. As a result of our deep relationship with Magento, we
work together on a joint marketing strategy. Sign-up of clients
across all regions remains strong with ARPU increasing from our
clients, and this now stands at approximately £1,500 per month.
In the year we added 219 customers bringing the total to 664
using the integration.
Our partnership with Shopify has continued to strengthen by way
of building on our value proposition for e-commerce merchants
through connecting into Shopify Flow. This allows customers of
Shopify to seamlessly create, segment and use the engagement
cloud messaging channels to create a personalised and
targeted experience for their merchant’s customer. This has also
allowed a seamless integration of process automation between
e-commerce and marketing platforms. We now have 56 clients
using the Shopify connector and expect this to increase as we
go into the new year.
Big Commerce in the period also named us as a global elite
partner and work is ongoing in building this relationship and
a joint go-to-market strategy. This should enable us to increase
our addressable market across all regions.
As part of our commitment to our B2B marketing customers, we
have continued to invest in our dedicated platform and channel
management resource to build on our strategic relationship with
Microsoft as we look to integrate our product in to Microsoft
Dynamics. We have seen our revenues from the Dynamics
connector grow by 10% to £3.9m with ARPUs remaining over
£1,000 per month.
People
This year we focused on creating a management structure that
sets the foundations for future growth as the business expands
internationally. We have upskilled the senior management team
as well as creating regional leaders for local decision making and
control. This has enabled us to increase management bandwidth
and develop new skills whilst still maintaining the culture within
our business.
We have invested in sales, customer success, marketing and
product development in the year, thus supporting our product
innovation goals, but also allowing us to further develop our
global brand awareness. The largest investment in people
was made in our international hubs where we continue to see
success in providing our customers with a scalable business
model and support the overall business growth.
We firmly believe our people are crucially important to our
business and its future; further investment will be made in the
training and development of all our employees coupled with
onboarding the new headcount to get up to speed as quickly
as possible.
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Chief Executive Officer’s report and financial review continued
“
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It’s hard for me to say how much easier my job has
become since coming onboard with dotdigital. The
platform’s ease of use has enabled me to share my
email responsibility with the wider team; they’re now
more empowered than ever to create
Shaun Munoz
Virgin Active
Growth Strategy
Our strong financial position and management team
mean we are ideally placed to add growth by acquisition
Expand our
product suite:
providing
organic growth
Focus on
cross-selling:
deeper customer
relationships
Expand
geographical
coverage
Grow our
customer base:
increasing our global
market presence
Organic
growth
Growth by
acquisition
Adjacent
relevant
technology
Deepening
our strategic
partnerships:
building new
connectors
Globalising
our talent:
organisational
strength and
capabilities
Deeper
functionality with
our core USP
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“
Engagement Cloud’s smart automation capabilities
have taken our customer engagement to the
next level. 150% increase in email open rates YoY.
Exceptional customer service, second to none.
dotdigital’s technical experts always know what they’re
talking about. Friendly and helpful advice, every time.
Marketing Team
Hafelle UK
Acquisitions
In the year we completed the full integration of Comapi, however
the decision was made to discontinue both the Dynmark and
Donky business units. The acquisition provided the Group with:
• Extending the Group’s marketing automation platform to
provide an industry-leading solution offering fully integrated
cross-channel and conversational commerce support to
marketers
• Enabling the Group to deliver aligned conversational
messaging across-channels including email, mobile push,
SMS, Facebook messenger, Apple business messenger,
Twitter and live chat
• Enabling the customers to meet consumer demand for a
more personalised communication experience and;
• Positioning us as the most advanced platform on the market
and making dotdigital more relevant in the strategic mobile-
first Asian market.
We will continue to investigate earnings enhancing opportunities
beyond organic growth but have very strict value enhancing
criteria to finding these strategic acquisitions. The areas we
would consider making an acquisition in, are:
1)
2)
3)
Companies that can help us expand into new geographic
markets or allow us to grow faster in a market that we
currently operate within
Companies that have relevant adjacent technology, beginning
initially in the mobile and social marketing space; and
Companies that can add new functionality (e.g. artificial
intelligence) that will add value to our customer base within
the mid- and small enterprise market.
Financial review
Revenues
The Group achieved revenue growth of 19% (15% from continuing
operations; 2018: 15%), which delivered record overall revenues
of £51.3m (£42.5m from continuing operations; 2018: £36.9m).
The quality of the revenue growth is evidenced by continued
stable recurring revenues of 86% (2018: 85%). The Group
continued to grow outside of the UK with international revenues
now accounting for 29% of the continuing operations’ total.
Business model
The Group generates the majority of its revenues from annual
message plans across multiple channels, which are recognised
equally over the life of the contract. In addition, we sell upgrade
packages to customers allowing them to use additional modules
and features of our platform. For more sophisticated customers
we offer customised functionality and integrations so that they
can maximise the use of their customer data. These professional
services are recognised as revenue as the work is performed
and completed.
Gross margins
The gross margin for the period for continuing operations was
90%, (2018: 87%). We continue to see the value in both direct and
partnership models of selling in our international regions, and
hence continue to invest in building long-term annuity revenues.
Operating expenses
Adjusted operating profit from continuing operations grew
by 25% from £9.4m to £11.8m. Part of this growth was due
to the margin improvement achieved via our cloud infrastructure
as we see the benefits of scaling. Investments made previously
within product development, sales and marketing also continue
to pay off.
Operating expenses from continuing operations as a percentage
of revenues remained at 62%, reflecting the growth in revenue
combined with the careful investment in areas which provided
the best rate of return. dotdigital continues to invest in people
particularly within the areas of development, sales and marketing,
with regional offices seeing the largest investment. This
investment enables us to continue enhancing and adding to
the product suite.
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“
It’s fair to say that migrating to Engagement Cloud
has transformed our ability to engage with our
customers. Now we can directly track around half
of our sales to email activity.
Mark Lippmann
Deborah Lippmann
Balance sheet
There was strong cash management in the year with cash
generated from continuing operations of £12.5m (2018: £11.2m).
The cash balance at the end of the period was £19.3m (2018:
£15.0m). The Group continues to be debt free and maintains
a healthy balance sheet. A combination of a highly efficient
cash collection process and an incentivisation push to move
more customers onto Direct Debit and automated credit card
collection helped with the year-end position.
Trade receivables have only grown by 6% in the year reflecting
revenue growth and good cash management. Overall receivables
have declined 6% as a result of a decrease in prepayments due to
better pricing achieved for the hybrid cloud infrastructure.
The Group continues to invest heavily in the engagement cloud to
increase functionality around cross-channel messaging, enhance
the Artificial Intelligence and Machine Learning capabilities
of the platform and improve connectors to e-commerce and
CRM platforms to allow our customers to make the most of
their data and provide excellent customer engagement. This
continued investment is demonstrated by the increase in product
development to £5.5m from £4.4m in 2018.
Goodwill
£9.1m of Goodwill reflects the acquisition of Comapi in 2017/18,
for a cash consideration of £10.7m. Identifiable intangible
assets included £1.2m of technology and £1.2m of customer
relationships. The former of these has been impaired as a result
of discontinuing this part of the business and hence reducing the
expected lifetime of the contracts from nine years to three years.
Tax
Profitability from continuing operation continues to grow,
however, this is not reflected within the tax charge, which is
now £0.06m (2018: £0.7m) with an effective tax rate of 0.5%,
the principal reason for the continuation of the low rate being
enhanced R&D tax credits.
EPS
In the year the adjusted basic EPS from continuing operations
increased by 33% to 3.93p (2018: 2.95p) and adjusted diluted
EPS from continuing operations increased to 3.88p (2018:
2.91p). The increase in adjusted EPS is driven by the increased
profitability and the reduction in the effective tax rate to 0.5%
from 3.1%.
Dividend policy
As announced last year, the Board conducted its review of its
organic business plan for the following three years. This included
evaluating the cash needs required for opportunities in organic
growth to increase shareholder value and capital expenditure.
The Board decided that it will continue to keep a progressive
dividend in line with Group EBITDA growth. Therefore, subject
to approval at the AGM in December 2019, the Board proposes
that the Group will pay a final dividend of 0.67 pence per ordinary
share (2018: 0.64p); to be payable at the end of January 2020.
Outlook
The Group is very excited with the opportunities from an
organic growth perspective through the technology innovations,
geographic expansion and strategic partnerships it has invested
in. With the additional investments in people across all regions it
sets the foundations for scalable growth for AI infused marketing
and data driven cross-channel Marketing Automation.
Although relatively early on, Q1 of the 2019/20 financial year
has started well with trading in line with expectations. With 86%
of our revenues recurring, a high proportion under contract and
strong client relationships we continue to have good visibility into
our earnings. We are confident in delivering continued organic
growth across our core organic growth pillars.
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Milan Patel
Chief Executive Officer
15 October 2019
Paraag Amin
Chief Financial Officer
15 October 2019
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The dotdigital difference
Empowering technology
Super-powerful and easy to use – so you can do
it all yourself.
Learning
We help you get smarter with inspiring events and
action-packed content.
Service
If you’re busy or short-staffed, we can do it all for you.
Expertise
We’ve been by your side for 20 years; our combined
heritage and experience puts you in good hands.
Innovation
Our freedom to innovate means we’re always
looking ahead.
19
Case study
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icelolly.com boosts conversions using Facebook
Audiences in automation programs
Founded in 2005, icelolly.com is the UK’s fastest growing
comparison website. Customers can compare and save on millions
of package holidays, cruises, flights, and car rentals from leading
UK travel companies.
Challenge
The marketing team at icelolly.com works tirelessly to deliver
personalised customer experiences. This was no better
highlighted than in the brand’s 2018 dotties win: combining tech
power to innovate.
As part of its personalisation strategy, the brand decided to add
the Facebook Extension into its business-as-usual marketing
programs in Engagement Cloud. The tool would retarget
engaged email subscribers who had stated their preferences.
The brand would move audiences along the customer journey –
from awareness to consideration and conversion – by providing
highly relevant Facebook ads.
17% conversion rate
from Facebook
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Solution
icelolly.com recognised that increasing its reach across other
channels, like Facebook, would help drive conversions. Using
Engagement Cloud, icelolly.com has been able to push data
from one channel to another and achieve an cross-channel
approach to marketing. So far, the brand has engaged seven
audience types.
Engaged contacts are served with targeted ads that reflect
their individual data, such as location (i.e. local airport), which
maximizes the relevancy of the message.
icelolly.com currently uses the all-inclusive preference list as
an active audience to target on Facebook. Those who say
they are interested in all-inclusive packages or holidays (in the
brand’s preference centre) will receive highly relevant targeted
ads on Facebook.
People will be encouraged to continue their search – a seamless
way of returning potential customers to the path to purchase.
Destination price alert triggers, which generate open and click
rates of 41% and 35% respectively in email, are a key example
of retargeting. For example, subscribers who have signed up for
destination alerts will be further notified through targeted ads on
their social feed. Combined with email, the Facebook Audience
extension increases relevancy in the overall customer journey.
Results
icelolly.com generated a 17% conversion rate from Facebook.
What’s more, retargeting ads have seen a 3% higher conversion
rate than general social ads – which can be attributed to
increased relevancy. Delivering the right message to the right
person at the right time has also bolstered customer satisfaction
– Trustpilot reviews are at an all-time high.
W I N N E R
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Risks, impact and mitigations
Risk area
Impact
Mitigation of risk
Data privacy
Use of public
cloud service
suppliers
Supplier and
computer
hardware
related risks
Certain laws and regulations such as the
General Data Protection Regulation (“GDPR”)
require or may require the Group and its
customers 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 proposed legislation could 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 an in-email
link. Such laws and regulations could restrict
customers’ ability to collect and use email
addresses, web browsing data and personal
information, which may reduce demand for
its products.
The Group utilises public cloud suppliers to
host its platforms and products. An event
resulting in multiple cloud data centre failing,
for any significant period, or termination of
services by a cloud supplier, may negatively
impact the Group’s business, operating
results and financial condition.
The nature of cloud computing means that
the majority of the platforms are on a shared
infrastructure that is more of a target for
cyber attacks.
• Operation of an open-door policy, including the sharing of
policies relating to security, compliance and data privacy.
• Maintenance of a public-facing Trust Centre communicating
important information.
• Research into the impact of new or altered legislation to
inform free resources. The Group actively contributes to
the digital marketing and messaging space to advocate
best practice and make sure its customers’ needs are
represented.
• Provisioning of global instances of the platforms,
allowing customers in certain regions to overcome data
sovereignty constraints.
• Ongoing monitoring of processes and policies in
compliance with GDPR.
• Ongoing monitoring of the regulatory environment, including
any guidance from supervisory authorities or compliance
actions made under GDPR and developments of the
California Consumer Privacy Act and e-Privacy Regulation.
•
Informed choice of best-of-breed cloud computing suppliers
(the Group has selected Microsoft Azure, CloudFlare,
Amazon AWS, and Google Cloud Platform), the architecture
of which facilitates high uptime SLAs and a quick recovery
in the event of a single region failure.
• Due diligence of cloud computing supplier security
and incident handling processes, penetration testing
results, change management and security and privacy
accreditations.
• Development and implementation of resilient global
instances of the platform to serve local customers
and avoid global customer impact in the event of a
regional outage.
• Regular simulation of Disaster Recovery plans to recover
computing resources in a secondary region.
• Build strong relationships with cloud suppliers at an
executive level.
An event resulting in a loss of functionality
at, or a total loss of, a data centre that hosts
message send components for a prolonged
period will result in sub-optimal service,
potentially leading to a loss in revenues. In
addition, events preventing or obstructing
the platform’s communication abilities, such
as the blacklisting of IP addresses at major
internet service providers will incur revenue
loss.
• The platforms are architected with resilience to cater for
single points of failure, including having multiple upstream
and internet suppliers that can keep delivering messages
in the event a single supplier fails.
• Frequently reviewing the most profitable upstream supplier
routing options, and negotiating contracts regularly based
on current and anticipated volume.
• Tracking of message metrics regular reviewed and
monitored by the executive team.
The Group relies on a range of upstream
suppliers to deliver SMS messages; a change
in relationship with one or more of these
suppliers, or one or more of these suppliers
no longer being able to operate, could impact
the Group’s profitability.
• Continual evaluation of suppliers and technologies with the
prioritisation of send volume, scalability and resiliency, and
business continuity.
• Continual investment in and maintenance of the Group’s
currently owned IP addresses to ensure global reputability
and use optimisation.
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Risk area
Impact
Mitigation of risk
Information
security and
cyber risks
The ever-evolving, sophisticated nature of the
cyber threat landscape poses an ongoing risk to
the Group. Revenue depends on the protection
of the Confidentiality, Integrity, and Availability of
data and computer systems, and a trust in the
Group’s brand. A successful cyber-attack against
the Group’s digital assets could significantly
impact the Group’s ability to function, as well as
its ability to retain and attract business.
Internet service
providers (ISPs),
reputation and
internet browser-
related risks
Risks related
to key platform
integrations
Brexit
As a large proportion of the Group’s revenue
is derived by charging a price per message
for sending emails and SMS 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, abuse
complaints from providers are not dealt
with properly, bad customer data generates
multiple complaints through ISPs or third-
party spam are blacklisted, these impact
the platform’s overall ability to effectively
deliver messages.
The Group is increasingly investing in integration
with third-party platforms to provide an enhanced
product feature set – for example, Shopify,
Facebook, and Google. These platforms all
have various contractual bases for access and
the Group maintains its obligations carefully.
However, any future change in the terms granting
the Group access may impact our continued
ability to integrate our product with these
platforms.
The Group has a large business footprint within
the United Kingdom; both in terms of staff
headcount, and in terms of the customer base.
Brexit (the expected departure of the United
Kingdom from the European Union at the end of
October 2019) still has a number of unknowns
and these present some amount of risk with
regards to the Group. Many of our UK-based staff
are citizens from other EU countries; at the time
of this report being released, there is not yet a
full understanding of their right to work in the UK
post-Brexit. In addition, a changing legislative
environment between a post-Brexit UK, and EU,
may place additional regulatory burdens on the
Group which make it harder to operate with EU-
based companies.
• Continual investment in a defined Information Security
programme, under the leadership of the dedicated
information security function.
• Attainment of the UK government-backed Cyber Essentials
Plus Certification, in addition to the implementation of
further technical controls such as regular vulnerability
scanning, third-party penetration testing, Intrusion
Detection/Protection, and security update schedules to
proactively detect and remediate against the latest threats.
• The continual promotion of a security culture within the
business via various awareness initiatives.
• The transference of some risk by the introduction of
Cyber Insurance.
• Provision of, and investment into, platform functionality
to help customers comply with industry best practice,
EU, Asia Pacific or US anti-spam regulations.
• Demonstration of commitment to anti-abuse through
admittance to various industry groups, such as the
Messaging, Malware and Mobile Anti-Abuse Working
Group (M3AAWG), the Email Sender and Provider
Coalition (ESPC).
• Continued investment into functionality that reduces rogue
trial account sign-ups and link checkers on outbound
messages to alert in case of phishing or fraud.
• Proactive handling of abuse complaints generated by
customer messaging, including account suspension and
agreement termination.
• Creation and maintenance of strong relationships with
these platforms.
• Where possible, creation of revenue-sharing arrangements
so there is mutual commercial benefit.
• Continuous review of competing functionality from
other vendors.
• Ensuring our platform policies align with the third parties.
•
Internal HR team reviewing strategies for dealing with
EU staff, depending on Brexit negotiation outcomes.
• Research and monitoring of legislative environment,
particularly in relation to data transfers between the UK
and EU and visa-versa.
•
Internal departments reviewing strategies to address data
storage and transfer, depending on Brexit negotiations
outcomes.
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Risks, impact and mitigations continued
Risk area
Impact
Mitigation of risk
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.
Geography
specific market
changes
Maximise
investment in
growing high-
performance
teams
Reliance on revenues relating to a
single region increases the risk of revenue
loss if that region were to experience an
economic decline.
Further, the Group’s geographic expansion
increases the risk of certain successful
UK policies and practices proving less
successful and providing a poorer level of
service and assurance in new territories.
Failure to attract, hire, develop and retain
high-performing individuals will reduce the
ability to achieve the Group’s goals.
Development and
maintenance of
products
There is a definite risk that without
continued growth in investment into new
products, maintenance and enhancement
of old products and expansion into areas
that a maturing marketing and customer
engagement market is expecting, the growth
of the Group will be impaired.
• Continual revenue growth year-on-year and reinvestment in
new product features, best-in-class customer support and
service offerings, enhanced brand recognition and improved
service delivery.
• A global marketing presence to attract new customers.
• Further improvement of the products’ renowned user
experience, including hiring dedicated user experience
professionals.
•
Increased tighter integration of the group’s newly acquired
business unit Comapi, in order to provide a broader and
more competitive product feature set.
• Continual increase in international revenues outside of
the UK.
• Successful exploration into options relating to geographic
expansion above and beyond the UK, US and APAC –
specifically Singapore and Netherlands.
• Constant review by the executive team for growth
opportunities in additional territories.
• Commitment to the delivery of a comprehensive
programme of formal and informal learning and
development opportunities aligned to the needs and
goals of the business.
• Continued commitment to organisational structures,
internal communications tools and processes to enable
cross-team collaboration.
• Regular evaluation of the benefits to ensure market
competitiveness.
•
Investment into existing and new office spaces that
make talent feel valued.
• Expansion into new territories increases accessible
talent pools the Group can hire in.
• Continued realisation of revenue growth and customer
retention from product investment.
•
Innovation and increased development of new core product
offerings in the customer engagement space, facilitating new
revenue opportunities and increasing the average recurring
revenue of the Group’s existing customers.
• A constant focus on enabling unrestrained customer growth
through the ease and flexibility of the Group’s best-of-breed
integrations.
• Continued evaluation and optimisation of product performance
in the technology landscape to reduce maintenance overheads.
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Risk area
Impact
Mitigation of risk
Evolving
technology
and customer
requirements
Failure to anticipate or respond to evolving
technological channels and customer
requirements or to introduce competitive
enhancements and new features may
impact growth and customer retention.
The introduction of new solutions by
competitors potentially makes the Group’s
solutions less competitive.
Loss of a
strategic
partnership
Revenues could be impacted if a strategic
technology partner had lost market share
or customers on mass e.g. if they had
significant change, loss of service, disaster
or data breach. In such an event, customers
may re-platform to a technology partner who
the Group doesn’t have a connector with.
If a strategic technology partner blocked
access to or no longer accepted a connection
to our products, there is also the risk that
customers may leave or migrate to a
competitor who has a connection, rather
than re-platforming away from the
technology partner.
• Remaining a credible provider of omnichannel customer
engagement SaaS solutions through constant investment
in and development of new solutions, partnerships and
enhancements.
• Development of a strategy that facilitates the
implementation of rapidly changing technologies,
anticipating client requirements and frequent product
enhancements.
• Dedication to remaining relevant to both the B2B and B2C
verticals, reducing risk through the breadth of the platform’s
solutions.
• Continued emphasis on recruiting and retaining leading
experts.
• Continued focus on combining email marketing and
automation capabilities with the market-driven need for
supporting more conversational channels and leveraging
data to drive decisions.
• Continued investment to strengthening or relationships
with our key strategic technology partners.
• Contractual arrangements and SLAs to mitigate the risk
where possible.
• A product and development strategy that continues to build
connectors into leading market share e-commerce and
CRM platforms, to reduce reliance on a single strategic
technology partner.
• Research and development into the competitive
environment and e-commerce/CRM market to make
informed decisions on connector research and
development.
• Services and functionality, to enable customers to migrate
between different technology partners, as well as out of the
box connectors they can use.
• Continued work with new and emerging partners about
providing connector functionality to their products.
• Connectors built into intermediary integration platforms and
data synchronization functionality to hundreds of platforms
at one time.
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Corporate social responsibility report
dotdigital remains focussed on the impact of
our Corporate Social Responsibility (CSR), on our
employees, partners and the broader communities.
Clients
As a SaaS business it is vital we continue to invest in our product
to ensure it effectively reflects and meets the needs of all our
clients, partners and prospects. This has been achieved by
maintaining the investment in our product team and allowing
time and resource to capture feedback and suggestions from
all users. In addition, our programme of “dotlive” events ensures
we can share our knowledge and capture our client and partner
ideas to influence the product roadmap.
Employees
Every territory of the Group has seen additional team members
hired in to join the business in support of our continued growth.
However, we are always keen to support the growth and
development of our existing employees which is demonstrated
by over 30% of roles in the Group being filled by our team through
promotion or transfer to different teams, offices and even
country. We are committed to growth from within as the first
port of call.
Our programme of Wellbeing Awards for employees continues
to show great engagement. The programme allows employees
access to a modest fund designed to encourage activities that
support personal wellbeing and a healthy lifestyle. Activities such
as gym classes, yoga, music and singing lessons all feature in
this year’s activities.
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Community and business partnership
We continue to see interest from our employees in our Volunteer
Programme with requests to support a wide range of charities
including; fund raising for a Mental Health charity, and physical
endeavours such as the Three Peak Challenge to raise money for
charity, working parties for Animal Rescue centres, night shelters
for the homeless and serving at local community kitchens.
This year saw the first of a programme of diversity-based events
aimed at our clients, prospects and partners. ‘Women at Work’
was a sold out event held at our London Bridge Office where we
heard presentations from our own employees and prominent
business leaders who shared their thoughts and experiences
around women at work. We will be running a series of similar
diversity-focussed events throughout the next year.
Charitable support
Our dotCommunity group is run by our employees for our
employees. They provide support and encouragement for all
our employees to get involved and raise money for charities.
Endeavours as varied as climbing mountains to baking cakes
have been completed by our employees both as part of
organised events and on their own initiative.
In addition, we regularly support charities such as Macmillan
with employee events and have the pleasure to welcome the
Macmillan fundraising team at one of the recent bake sales.
Environmental partnership
We are delighted when our strategic decisions also have
environmental benefits. Our continued investment from physical
data rooms to the ‘Cloud’ means we can support environmentally
positive technology such as Microsoft Azure which has been
carbon neutral since 2014.
Internally, we have invested in audio/video technology which has
allowed us to focus on reducing travel time and costs for many
meetings which can now be completed very efficiently using the
AV technology.
We continue to assess and consider additional technologies that
can provide efficiencies that impact costs and the environment.
Strategic report
The strategic report was approved by a duly authorised
committee of the Board of Directors on 15 October 2019
and signed on its behalf by:
Milan Patel
Chief Executive Officer
15 October 2019
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Milan Patel FCCA ACSI
Chief Executive Officer
Paraag Amin CFA
Chief Financial Officer
Milan joined the Company in 2007 and was appointed Group
Company Secretary in 2009, CFO in 2015 and CEO in 2016. Milan
is a fellow member of the Association of Chartered Certified
Accountants and an associate member of the Chartered Institute
of Securities and Investments. He has been responsible for the
Group’s admission to ISDX and the introduction to AIM.
Paraag was appointed to the Board in February 2018. He
has significant public market experience having held senior
roles at a number of investment banks within equity asset
management, research and specialist sales, totaling 15 years,
as well as previously founding his own business in the digital
marketing space.
Paraag qualified as a Chartered Financial Analyst in 2004 with
Goldman Sachs. He also held senior roles within equities at Citi,
ABN Amro, RBS, Credit Suisse, Peel Hunt and Canaccord Genuity.
He is responsible for the Group’s functions in financial
management and reporting, regulatory compliance and legal
and corporate governance for the business.
Milan was responsible for the Group’s functions in financial
management and reporting, regulatory compliance, legal and
corporate governance for the business prior to being made
CEO of the Group. He also brings substantial strategic financial
and commercial experience to the Board. As well as financial
acumen, he has developed a broad range of operational
competencies, a grasp of strategic objectives, clear leadership,
international business development, mergers and acquisition
and strong decisive management skills.
Milan is now responsible for leading the executive team, vision
and growth strategy for the business. More specifically Milan is
leading our international growth strategy, accelerated product
innovation, developing strategic partnerships and investigation
of potential acquisitions. He has a strong track record of delivery
of performance against plan.
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Tink Taylor
Interim Chairman
Boris Huard
Non-Executive Director
Tink is Founder and President of dotdigital Group PLC (founded
in 1999). He has over 20 years’ experience in the field of digital
communications and has introduced digital marketing to
companies large and small.
Boris joined the Board on 26 March 2019 and is the UK&I
Managing Director for Experian Decision Analytics, bringing
present day experience of running software, big data and
analytics businesses – topics of key importance to dotdigital.
Boris joined Experian in 2014, having held previously roles in
the technology industry for 15 years, ranging from divisional
Managing Director at Logica, Board Director with Maxima Plc,
to Chief Executive at Sword CTSpace.
During those years, he delivered sustainable organic growth
and executed bolt-on acquisitions. From turnaround to
successful public to public exit transactions, Boris drove
performance through hands-on P&L management, international
business development, cross-continents operations, mergers
and acquisitions and company restructurations and integrations.
Tink has been pivotal in the development of digital marketing
since its outset in both the UK, the USA and in APAC.
Tink has served as an elected member of the UK Direct
Marketing Association’s Email Marketing Council, Chairing
the Partnership and Deliverability working parties.
Tink has judged and later chaired the Email, Mobile and Agency
categories at the UK DMA’s awards for over half a decade.
He also served on the Email Marketing Council at UK Internet
Advertising Bureau.
In 2014, Tink was elected to the Board of the US Direct Marketing
Association’s Email Experience Council (EEC). He chairs the
nomination committee and since 2016 has acted as
a judge for the EEC email marketing awards.
Tink first launched dotdigital in the US in Q4 2012 and later
took dotdigital to APAC in 2015.
Tink is currently a strategic advisor to dotdigital and the PLC
Board. He constantly strives to help individual organisations, and
the industry as a whole, develop and progress whilst acting as
a serial tech advisor and investor outside of dotdigital. In 2018,
Tink was invited to judge the UK Tech Founder and Great British
Entrepreneur Awards along with the ANA ECHO awards
in the USA.
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Corporate governance report
As an AIM-quoted company, we recognise the importance of
applying sound governance principles in the successful running
of the Group. The Board has elected to comply with the Quoted
Companies Alliance (QCA) Corporate Governance Code
and will report annually on our compliance with the code and
any exceptions.
Compliance statement
1.
Establish a strategy and business model which promotes
long-term value for shareholders (fully complies)
The strategy and business operations of the Group are set
out in the Strategic Report on pages 2 to 27 of the Group’s
annual report. The risk section of the annual report are on
pages 22 to 25 and deals with the challenges the business
faces and how these challenges are mitigated/addressed.
The Chief Executive is responsible for the leadership and day-
to-day management of the Group. This includes formulating
and recommending the Group’s strategy for Board approval
and then executing the approved strategy. You can find a full
description of the roles of the Board and the founder at www.
dotdigitalgroup.co.uk.
Our simple and transparent business model has consistently
delivered value to our shareholders.
2.
Seek to understand and meet shareholders’ needs and
expectations (fully complies)
The Group seeks regular dialogue with both existing and
potential new shareholders either through the management
team, investor relations or through sector analysts, ensuring
its strategy, business model and performance are clearly
understood as well as to understand the needs and
expectations of shareholders.
The Chief Executive and Chief Finance Officer meet
regularly with investors and analysts via investor roadshows,
attend investor conferences and carry out capital markets
days to provide updates on the Group’s business and
obtain feedback regarding the market’s expectations of
the Group through the brokers or direct feedback to the
management team.
The Board invites communication from its private investors
and encourages attendance by them at the Annual General
Meeting (AGM). All Board members are present at the AGM
and are available to answer questions from shareholders.
Notice of the AGM is at the least 21 clear days and the
business of the meeting is conducted with separate
resolutions, voted by proxy and with the result of the voting
being clearly indicated throughout the meeting. The results
of the AGM are subsequently published on the Company’s
corporate website and are announced through a regulatory
information service.
Our Senior Independent Director, Boris Huard, is available
to shareholders where concerns have not been resolved
through the normal channels of communication with the
Board and for when such contact with certain members
of the Board would be inappropriate.
The Board believes that they have successfully engaged
with their shareholders in the past and will continue to do
so going forward.
3. Take into account wider stakeholder and social responsibilities
and their implications for long-term success (fully complies)
We are committed to meeting with customers to seek their
regular feedback to ensure a high level of customer service
and to improve our platform. We have various channels for
customers and prospects to communicate with the Group
whether it be through the messaging channels or the customer
success executives. The feedback is then reviewed on a
regular basis by the senior management team of the Group.
The Group is mindful of its corporate social responsibilities
and the need to build and maintain strong relationships
across a range of stakeholder groups. As a Company, we
regard this as a key principle in what we do. The Group has
established a Social Committee that consists of employees
across all departments and seniority levels to engage with
stakeholders to help enrich communities. The corporate
social responsibility report can be found on page 26.
The Group is fully committed to encouraging the ‘employee
voice’ and acting on the feedback we receive. Whether by
informal discussion or by our annual employee satisfaction
survey, the opinion and feedback provided by our employees
is vital to shaping the business. Our employees are at the
heart of our business and we consistently strive to train and
develop them for career progression.
The Board closely monitors the results of the Company’s
Employee Engagement Survey to address where possible
any concerns raised and ensure the alignment of interests
between the Company and its employees. This alignment is
vital to shaping the business. An example of this has been
the successful roll-out of a new benefit programme for all
staff as a result of staff feedback.
4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
(fully complies)
The Group’s system of internal controls, identification of
significant risks and reviewing its effectiveness are the
responsibility of the Board. These systems are designed to
mitigate the risk of failure to achieve the business objectives.
These systems can only provide reasonable, but not
absolute, assurance against material misstatement or loss.
There is an ongoing process for identifying, evaluating and
managing the Group’s significant risks and this is regularly
reviewed by the Risk Committee and the Board. The Group
also keeps an active risk register which is also formally
reviewed by the Committee on a quarterly basis.
The internal control procedures are delegated to Executive
Directors and senior management in the Group, operating
within clearly defined terms set by the Risk Committee. The
Board regularly reviews the internal control procedures in
light of the ongoing assessment of the Group’s significant
risks and is reviewed on a quarterly basis.
On a monthly basis, the management accounts, including
a comprehensive financial report, are reviewed by the
Board in order to provide effective monitoring of financial
performance.
A summary of the principal risks and uncertainties facing the
Group, as well as mitigating actions, are set out on pages 22
to 25.
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Executive Directors
Milan Patel
Paraag Amin
Non-Executive Directors
Frank Beechinor-Collins
Richard Kellett-Clarke
Peter Simmonds
Tink Taylor
Boris Huard
Board
Audit
Committee
Risk
Committee
Remuneration
Committee
Nomination
Committee
Attended
Total
Attended
Total
Attended
Total
Attended
Total
Attended
Total
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3
3
3
3
3
3
3
1
1
1
1
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11
5
8
6
11
4
11
11
7
8
7
11
4
2
2
2
2
1
1
1
1
1
1
5. Maintain the Board as a well-functioning, balanced team
led by the Chair (partially complies)
The Group is managed by a Board of Directors chaired in
the interim while the Group searches for a permanent Non-
Executive Chairman by Tink Taylor. The Board is responsible
for taking all major strategic decisions and addressing any
significant operational matters. In addition, the Board reviews
the risk profile along with the Risk Committee of the Group
and ensures that an adequate system of internal control
is in place.
Management information systems are in place to enable
the Board to make informed decisions to properly discharge
their duties. A formal schedule of Matters Reserved for the
Board was adopted by the Board on 25 September 2018 and
is reviewed annually. The Board currently consists of two
Executive Directors, one Founder and one Independent Non-
Executive Director. As part of ensuring the Board complies
with this principle the Nominations Committee have started
a formal process to appoint a Non-Executive Chairman
and another independent Non-Executive Director and once
appointed the Group will fully comply with this principle.
Each of the Non-Executives spends a minimum of two days
a month on dotdigital Group business matters. Both the
Independent Non-Executive Directors are considered by
the Board to be independent of management and free from
any business or other relationship that could materially
interfere with the exercise of their independent judgement
in accordance with the QCA Code.
Tink Taylor or Boris Huard, Non-Executive Chairman and
Senior Independent Director respectively, are available
to shareholders where concerns have not been resolved
through the normal channels of communication with the
Board and for when such contact would be inappropriate.
The Board has sufficient members to contain the appropriate
balance of skills and experience to effectively operate and
control the business. Roles of the Chairman and the Chief
Executive are separate, with their roles and responsibilities
clearly defined and set out in writing.
The Chairman’s main responsibility is the leadership and
management of the Board and its governance. He meets
regularly and separately with the Chief Executive and the
Non-Executive Directors to discuss matters for the Board.
The Chief Executive is responsible for the leadership and day-
to-day management of the Group. This includes formulating
and recommending the Group’s strategy for Board approval
and executing the approved strategy. The Board meets
monthly, at least 12 times a year, and more frequently if
necessary. In addition to this the Board attends an annual
strategy meeting which also includes senior Directors
outside of the Board which are part of the Leadership Team.
The table above shows attendance for the period July 2018
to June 2019.
6. Ensure that, between them, the Directors have the
necessary up-to-date experience, skills and capabilities
(partially complies)
The Board considers its current composition adequate
with the current situation and overall size to be both
appropriate and suitable with the adequate skills, experience
and capabilities to make informed decisions, evaluate
performance and constructively criticise strategy. However,
it has decided to appoint an independent permanent Non-
Executive Chairman and Non-Executive Director and has
retained a search firm to start the formal process.
The composition of the Board is reviewed annually by
the Nomination Committee, which is currently evaluating
the gender composition of the Board. The Board is fully
committed to the appointment of the right skills that
are required to grow shareholder value. One third of the
Directors retire at the AGM in rotation in accordance with
the Company’s Articles of Association, thereby providing
shareholders the ability to decide on the election of the
Company’s Board. Their biographical details can be found on
pages 28 and 29.
The Nomination Committee, through a thorough evaluation
of the skills, knowledge and experiences of a proposed
new Director, makes recommendations to the Board who
then make the final decision on the appointment of a new
member. Throughout the year, the Directors receive updates
on corporate governance matters from either the Company
Secretary or the Company’s Nominated Advisors.
To ensure that the Board continue to develop their skills
and keep up to date with market developments they have
access to independent professional advice which will be at
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Corporate governance report continued
the expense of the Company. In addition, all members of the
Board have access to the support and advice of the Company
Secretary who is responsible for the induction programme of
new members.
7. Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement (partially
complies)
The Nominations Committee is responsible for Board
evaluation. The Committee in the past has carried out
informal Board performance evaluations but has now
embarked on this formal process for the Board and
questionnaires have been circulated to ensure they comply
with this principle. The learnings from this process will
be addressed in the coming months. The Nominations
Committee intends to conduct an internal evaluation on
an annual basis, and that process will be repeated for
each of the Committees of the Board. The results will be
used by the Nominations Committee for its approach to
succession planning.
8. Promote a corporate culture that is based on ethical values
and behaviours (fully comply)
We are committed to acting ethically and with integrity in all
our business relationships. The Company recognises the
benefits of a diverse workforce and is committed to providing
a working environment that is free from discrimination.
The Company seeks to promote the principles of equality
and diversity in all its dealings with employees, workers,
job applicants, clients, customers, suppliers, contractors,
agencies and the public. Our people are the difference –
hence we aim to hire, keep and train the best. We continue
to encourage our unique and supportive culture, which
we believe sets us apart from other companies. Our
comprehensive set of policies and procedures cover all of
our operations. Our policies and procedures are constantly
updated and communicated to relevant employees. Within
the organisation we also have numerous policies that are
communicated to all employees that have been adopted by
the Group for us to be compliant with our ethical and cultural
values that we promote within the business.
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board (fully
comply)
The Board is supported by a Remuneration Committee, Audit
Committee and Nomination Committee. Any matters that fall
outside of the responsibility of these committees are then
dealt with by the Board. The role and responsibilities of the
Chairman, Chief Executive and other Directors can be found
separately. The details of the committees are contained
within their written terms of reference which can be found on
the Group’s website.
Throughout the year the Chairman of each committee
feeds back to the Board any issues which require further
consideration by the Board. Each of the Board committees
has the ability to use external advisors as they see fit in
furtherance of duties which are at the Company’s expense.
Further details of the composition and meetings of these
committees can be found within the annual report.
10. Communicate how the Group is governed and is performing by
maintaining a dialogue with shareholders and other relevant
stakeholders (fully comply)
The Company is committed to open communication with
all its shareholders. Communications with shareholders is
predominantly through the annual report and AGM. The last
AGM results can be found on the Group’s website. Other
communications are in the form of full-year and half-year
announcements, periodic market announcements (as
appropriate), one-to-one meetings and investor road shows.
The Remuneration Committee report is included on pages
34 to 38.
The Group’s website www.dotdigitalgroup.co.uk is regularly
updated and users can register to be alerted via email when
announcements or details of presentations and events
are posted on the website. Annual reports and notices of
meetings for at least the last five years can be found on the
Group’s website.
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Audit Committee report
The Audit Committee is a sub-committee of the Board. The
responsibilities of the committee include:
• Reviewing the half-yearly and full-year accounts and
results announcements of the 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;
• Monitoring and reviewing the effectiveness and
independence of the external auditors, agreeing the nature
and scope of their audit, agreeing their remuneration, and
considering their reports on the Group’s accounts, reports to
shareholders and their evaluation of the systems of internal
financial control and risk management.
Composition of the Audit Committee
The Audit Committee comprises of Tink Taylor and Boris Huard.
The temporary Chairman of the Audit Committee is Boris
Huard as the Company continues to actively search for a new
Chairman. The Committee meets separately with the external
auditors without management being present.
The Secretary to the committee is Company Secretary,
George Kasparian.
Main activities of the Audit Committee
At its meeting on 2 October 2019 the Audit Committee reviewed
the Group’s preliminary announcement of its results for the
financial year to 30 June 2019 and the draft report and accounts
for that year. The Audit Committee received reports from the
external auditors on the conduct of their audit, their review of the
accounts, including accounting policies and areas of judgement,
and their comments on risk management and control matters.
The external auditors also presented their proposed fees and
scope for the forthcoming year’s audit. The Audit Committee
also reviewed the performance of both the internal accounting
function and external auditors. The review of the external
auditors was used to confirm the appropriateness of their
reappointment and included assessment of their independence,
qualification, expertise and resources, and effectiveness of their
audit process.
The Audit Committee also reviewed the effectiveness of the
Company’s systems for internal financial control and risk
management. The Committee reviewed the Group’s credit control
procedures and risks concerning IT controls.
Independence of external auditors
Both the Board and the external auditors have safeguards in
place to avoid the possibility that the auditors’ objectivity and
independence could be compromised. Our policy in respect of
services provided by the external auditors is as follows:
• Audit-related services – the external auditors are invited
to provide services which, in their position as auditors,
they must or are best placed to undertake. This includes
formalities relating to borrowings, shareholders and other
circulars, various other regulatory reports and work in respect
of acquisitions and disposals;
• Tax consulting – in cases where they are best suited, we use
the external auditors. All other significant tax consulting work
is put out to tender;
• General consulting – in recognition of public concern over the
effect of consulting services on auditors’ independence, our
policy is that the external auditors are not invited to tender for
general consulting work.
Internal management accounting
The Audit Committee reviewed the performance of the internal
accounting function, the department’s resource requirements
and also approved the internal budgets for the year ending 30
June 2020. The Committee concluded that these budgets were
both prudent and realistic in the context of the Group’s ambitions.
Whistleblowing
The Group has in place a whistleblowing policy which sets out
the formal process by which an employee of the Group may,
in confidence, raise concerns about possible improprieties in
financial reporting or other matters.
Approval
This report was approved by the Board on 2 October 2019 and
signed on its behalf by:
Boris Huard
Interim Chairman of the Audit Committee
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Remuneration Committee report
Statement from the Chairman of the Remuneration
Committee
I am pleased to present the Remuneration Committee report for
2019, which sets out the remuneration earned and paid to the
Directors in the year ended 30 June 2019.
As an AIM-listed company, dotdigital Group Plc is not required to
comply with the remuneration reporting requirements applicable
to fully listed companies in the UK. However, the Remuneration
Committee has considered these regulations in the preparation
of this report for the year as a matter of best practice.
The Remuneration Committee operates under a defined set of
Terms of Reference, which were approved and adopted at year
end and which can be found at https://www.dotdigitalgroup.
com/wp-content/uploads/2018/09/Remmuneration-committee-
Terms-of-Reference.pdf. It is intended that these will be kept
under continuous review to ensure they remain appropriate and
reflect any changes in legislation, regulation or best practice.
The annual report on remuneration provides details of the
amounts earned in respect of the year ended 30 June 2019
and how the Directors’ remuneration policy has operated.
The annual report on remuneration, detailed on pages 34 to 38,
is subject to an advisory shareholder vote at the 2019 AGM.
Review of the year ended 30 June 2019
During the year, the Remuneration Committee worked to embed
the Company Share Option Plan (‘CSOP’) into the Group incentive
mechanism for the Senior Directors and employees in the Group.
This will allow employees to be able to own shares in the Group
which closer aligns them with shareholder value creation and will
increase employee retention. The first awards under this plan will
be granted in October 2019 for employees that are not part of the
long-term incentive plan.
As described earlier in the annual report the Group has
performed well during the year, delivering strong revenues of
£42.5m from continuing operations and total profit before tax
from continuing operations excluding exceptional costs and
share based payments of £11.8m. Consequently, the Executive
Directors earned an annual cash bonus equivalent to 53% of
base salaries for FY18/19.
The Remuneration Committee remains committed to a fair
and responsible approach to executive pay whilst ensuring it
remains in line with best practice and appropriately incentivises
Executive Directors over the longer term to deliver the Group’s
strategy. The Board remains focused on ensuring that the
Group retains and develops the talents needed to deliver on
its growth targets.
Accordingly, the Remuneration Committee determined it
was appropriate to award the Chief Executive Officer and the
Chief Financial Officer a salary increase in the year to closely
align the base pay to bring them closer to the median pay of
AIM 100 companies.
Outlook for 2020
A key focus in the year will be to fully comply by the governance
requirements for AIM-listed companies and how these will be
applied to both the remuneration and Corporate Governance of
the business.
An annual review of the effectiveness of the Committee by both
the Board and the Committee itself is underway and changes
will be made as a result of feedback from the review.
As the company share option plan (CSOP) plan is now
established the Remuneration Committee will work closely
with the executive team to grant the first options under the plan
in October 2019 to employees that are not part of the LTIP.
On behalf of the Board
Boris Huard
Chairman of the Remuneration Committee
15 October 2019
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Directors’ Remuneration Policy
This section sets out the Directors’ remuneration policy. The Remuneration Committee considers the remuneration policy annually
to ensure that it continues to underpin the Group’s strategy.
Key principles
The main aim of the Group’s policy is to align the interests of Executive Directors with the Group’s growth strategy and long-term
creation of shareholder value. The policy is designed to remunerate the Executive Directors competitively and appropriately and
allows them to share in this success and the value delivered to shareholders.
The policy is based on the following principles:
• Promote shareholder value creation and support the business growth strategy;
• Ensure that the interests of the Directors are aligned with the long-term interests of shareholders;
• Deliver a competitive level of pay for the Directors sufficient to attract, retain and motivate individuals; and
• Ensure that an appropriate proportion of the package is determined by targets linked to the Group’s performance.
Executive Directors’ Remuneration Policy
Component Purpose and link to strategy
Operation
Maximum
Reviewed annually against
salary surveys for market rate,
Group performance, role and
experience.
No overall maximum has
been set however they
are reviewed in the wider
context of the Group.
Performance measure
Not applicable
Base
salary
Fixed remuneration to
provide a competitive base
salary to attract, motivate
and retain Directors with
the experience and
capabilities to achieve
the strategic aims.
Benefits
To provide market-
competitive benefits
package.
Pension
To provide an appropriate
level of retirement benefit.
Annual
bonus
Rewards performance
against annual targets
which supports the
strategic direction
of Group.
LTIP
To drive and reward the
achievement of longer-
term objectives, support
retention and promote
share ownership for
Executive Directors.
Receive benefits in line with
market practice, these include
company car/allowance, private
medical, income protection and
death in service insurance.
Executive Directors are eligible
to participate in the Group’s
pension plan.
Awards are based on annual
performance.
Amount paid out is determined
by the Committee after the year
end based on performance
against targets.
Any bonus earned is paid
in cash.
The Company has adopted
a new LTIP.
Awards can be made over
conditional shares and/or nil
cost or nominal cost share
options.
Vesting will be subject to the
achievement of specified
performance conditions over
a period of three years.
Awards may be subject to malus
provisions at the discretion of
the Committee.
Set a level deemed
appropriate by the
Remuneration Committee.
Not applicable
Pension contributions are
up to a maximum of 5% of
base salary and are paid in
addition to base salary.
The maximum annual
bonus opportunity is
100% of base salary.
The normal maximum LTIP
opportunity is 150% of the
individual’s base salary
where annual grants are to
be made or 450% of salary
where end-to-end awards
are made rather than annual
grants.
Not applicable
Performance measures
are set at the start of the
year annually and are
aligned with key financial,
strategic and/or personal
targets. Currently 60%
of the bonus is based
on total profit before tax
(PBT) performance and the
remainder 40% is based on
hitting revenue growth.
Relevant performance
measures are set that
reflect underlying business
performance. For awards
granted in 2017, the vesting
of awards will be subject
to three years cumulative
total shareholder return.
Stretching targets are
required for maximum
pay out.
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Directors’ Remuneration Policy continued
Explanation of Performance Measures
Performance measures are selected that are aligned with the performance of the Group and the interests of shareholders. Stretching
performance targets are set each year for the annual bonus and long-term incentive awards. When setting these performance
targets, the Committee will consider several different reference points, which may include the Group’s business plan and strategy
and the economic environment.
The annual bonus is based on PBT performance which is a key financial performance metric of the Group. As we look at future
years the bonus will be weighted towards achieving PBT and the remaining 40% based on revenue growth.
The LTIP is based on total shareholder return performance as the Committee considers this to be a key measure of long-term
business performance.
The Committee retains the ability to adjust or set different performance measures if events occur which cause the Committee
to determine that the measures are no longer appropriate, and that amendment is required so that they can achieve their
original purpose.
Awards and options may be adjusted in the event of a variation of share capital in accordance with the rules of the LTIP.
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. As the business has exceeded the size of company
thresholds no further grants will be made on this scheme and therefore it is now closed. The CSOP scheme has now been adopted
as per the approval by the shareholders at last year’s Annual General Meeting. 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.
Non-Executive Directors’ Remuneration Policy
The remuneration policy for the Non-Executive Directors is to pay fees necessary to attract an individual of the talent required,
taking into consideration the size of the business and the time commitment of the role.
Details are set out in the table below:
Approach to setting fees
Basis of fees
Other Items
The fees of the Non-Executive Directors
are agreed by the Chairman and Chief
Executive. Fees are reviewed annually.
Fees are set taking into account the level
of responsibility, relevant experience
and specialist knowledge of each Non-
Executive Director.
Fees may include a basic fee and
additional fees for further responsibilities.
Fees are paid in cash.
Non-Executive Directors do not receive
any benefits or pension contributions.
Travel and other reasonable expenses
incurred in the course of performing their
duties are reimbursed.
Details of current Executive Directors’ contracts
The Executive Directors each entered into a service contract with the Group. Each appointment runs for one year from that date and
is terminable by six months’ notice by either party to expire at the end of that year or at any time thereafter. The agreement contains
restrictive covenants. Upon termination, no benefits (other than those accruing during the notice period) are due to the Director.
Statement of consideration of shareholder views
The Committee considers shareholder feedback received on remuneration matters, including issues raised at the AGM as well
as any additional comments received during any other meetings with shareholders.
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Remuneration
The Directors’ emoluments for the year ended 30 June 2019 are as follows:
Executive Directors
P Amin
M Patel
Non-Executive Directors
F Beechinor-Collins
R Kellet-Clarke
P Simmonds
S Bird
T Taylor
B Huard
Salary/Fees
£’000
Benefits
£’000
164
285
449
6
12
18
Salary/Fees
£’000
Benefits
£’000
32
27
29
2
138
9
237
–
–
–
–
–
–
–
12-month period to 30.06.19
Bonus
£’000
86
150
236
Bonus
£’000
–
–
–
–
–
–
–
Ex-gratia
payment
£’000
Pension
£’000
Share-based
payment*
£’000
Total
£‘000
Number of
outstanding
options
–
–
–
8
13
21
99
289
388
363
875,000
749 1,375,000
1,112 2,250,000
Ex-gratia
payment
£’000
Pension
£’000
Share-based
payment
£’000
Total
£‘000
Number of
outstanding
options
–
17
–
–
–
–
17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32
44
29
2
138
9
254
–
–
–
–
–
–
–
* The share-based payment calculation is determined on the end to end share option awards allocated to Milan Patel post the AGM
in December 2017 and to Paraag Amin as of October 2018, which could be awarded at the end of a 3-year performance period. These
are based on an aggressive total shareholder return performance criterion. Under IFRS 2, the group has to provide an estimate for the
costs based on a Black Scholes model valuation each year, as if they fully paid out at the end of the performance period in December
2020 and October 2021 for Paraag. To be fully paid out, the group must achieve a compounded 35% TSR over a 3-year period.
Executive Directors
P Amin
S Bird
P Blundell
M Patel
T Taylor
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Ex-gratia
payment
£’000
Pension
£’000
Share-based
payment**
£’000
12-month period to 30.06.18
70
22
67
265
125
549
–
–
–
12
2
14
10
–
–
130
–
140
–
–
40
–
–
40
4
1
5
13
3
26
–
–
–
145
–
145
Total
£‘000
84
23
112
Number of
outstanding
options
–
–
–
565 1,375,000
130
–
914 1,375,000
** Share-based payment charge relates to the outstanding end-to-end LTIP options that were approved at the AGM on 19 December
2018 at the year end.
Non-Executive Directors
F Beechinor-Collins
R Kellet-Clarke
P Simmonds
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Ex-gratia
payment
£’000
Pension
£’000
Share-based
payment
£’000
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35
45
121
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£‘000
41
35
45
121
Number of
outstanding
options
–
–
–
–
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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:
M Patel
T Taylor
No of
shares
held
1,575,927
29,776,667
31,352,594
% Holding
0.53
9.99
10.52
Directors’ interest in share options
Under the Group’s executive share option scheme, the following Director has the right to acquire Ordinary shares:
Director
M Patel
P Amin
Grant
date
19/12/17
24/10/18
No. of share
options granted
1,375,000
875,000
Option
price (pence)
0.5
0.5
Date first
exercisable
18/12/20
23/10/21
Expiry date
18/12/22
23/10/23
The options granted to Milan Patel and to Paraag Amin can only be exercised at the end of a 3-year performance period, based on an
aggressive total shareholder return performance criterion. Under IFRS 2, the Group has to provide an estimate for the costs based on
a Black Scholes model valuation each year, as if they fully paid out at the end of the performance period in December 2020 to Milan
Patel and October 2021 for Paraag Amin. To be fully paid out, the Group must achieve a compounded 35% TSR over a 3-year period.
Composition of the Remuneration Committee
The Remuneration Committee comprises independent Non-Executive Directors, namely Boris Huard (Chairman) and Tink Taylor. The
Committee makes recommendations to the Board on Executive Directors’ service agreements and remuneration. In doing so it has
undertaken relevant research to ensure that remuneration levels are competitive with the industry average. The Committee met two
times during the year.
The Chief Executive attends meetings and provides information and support as requested. He is not present when his remuneration
package is considered.
Advisors
During the year, the Remuneration Committee did not receive any external advice.
Approval
This report was approved by the Board on 15 October 2019 and signed on its behalf by:
Boris Huard
Chairman of Remuneration Committee
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Report of the Directors
The Directors present their report with the financial statements
of the Company and the Group for the year ended 30 June 2019.
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”) via
a leading cross-channel marketing automation platform and
managed services to digital marketing professionals.
Review of business
During the year the Group has shown significant growth from
continuing operations (Core) in customer numbers, sales and
profits. Revenues grew from £36.9m in the year ended June 2018
to £42.5m for the year ended June 2019, an increase of 15%.
Adjusted operating profit grew from £9.4m in the 12 months to
June 2018 to £11.8m for the year ended June 2019, an increase
of 25%.
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 continuing operations are:
Revenue
2019
2018
£42.5m
£36.9m
Adjusted operating profit
£11.8m
£9.4m
ARPU
£966
£845
%
increase
15%
25%
14%
Dividends
The Board proposes a dividend payment of £1,996,805
comprising an ordinary dividend of 0.67p per ordinary share
(2018: £1,903,171 ordinary dividend of 0.64p per ordinary share)
to be distributed to shareholders in respect of the Group’s
reported performance.
The Board’s dividend policy will be reviewed annually in line with
the cash needs required for opportunities in organic growth to
increase shareholder value and capital expenditure.
Highest paid Director
The Companies Act 2006 requires certain disclosures about the
remuneration of the highest paid Director taking into account
emoluments, gains on exercise of share options and amounts
receivable under long-term incentive schemes. On this basis, the
highest paid Director in the year was Milan Patel and details of his
remuneration are disclosed in the Remuneration Committee Report.
Strategic report
The strategic report covers pages 2 to 27.
Supplier payment policy
The Group’s policy is to settle the terms of payment with
suppliers when agreeing the terms of each transaction and to
ensure that suppliers are made aware of the terms of payment
and to abide by the terms of payment. The average trade
creditors for the Group, expressed as a number of days, was
94 days (2018: 156 days).
Directors’ interests
The Directors who served during the period and their beneficial
interests in the shares of the Group as recorded in the Register of
Directors’ interests at 30 June 2019 are as follows:
30.06.19
30.06.18
Number of
shares held
Percentage
sharehold-
ing
%
Number of
shares held
Percentage
sharehold-
ing
%
Director
F Beechinor-
Collins
S Bird
R Kellett-Clarke
–
–
–
– 199,194**
– 13,558,996
–
390,000
M Patel
1,575,927
0.53
1,575,927
P Simmonds
–
– 2,491,470*
T Taylor
29,776,667
9.99 29,776,667
0.07
4.55
0.13
0.53
0.84
9.99
* Frank Nominees Limited holds 1,477,972 shares in respect of
Peter Simmonds holding/voting rights acting as nominee for
Alliance Trust Pensions Limited. Frank Nominees is a vehicle
used by Kleinwort Benson Limited to hold securities for
clients, trusts, SIPPs etc. The beneficiary of the SIPP is Peter
Anthony Simmonds.
** The 199,194 shares shown as being held by Frank Beechinor-
Collins are owned by Curra Trust, a trust established for
the benefit of his children and in which he has no beneficial
interest.
The Directors who served during the period and their beneficial
interests in share options in the Group, as recorded in the
Register of Directors’ interests as at 30 June 2019 are as follows:
Director
M Patel
P Amin
30.6.19
Number of
options held
30.6.18
Number of
options held
1,375,000
1,375,000
875,000
–
The options granted to Milan Patel and Paraag Amin can only be
exercised at the end of a 3-year performance period, based on
an aggressive total shareholder return performance criterion.
Under IFRS 2, the group has to provide an estimate for the costs
based on a Black Scholes model valuation each year, as if they
fully paid out at the end of the performance period in December
2020 to Milan Patel and October 2021 for Paraag Amin. To be
fully paid out, the group must achieve a compounded 35% TSR
over a 3-year period.
Substantial interests
On 30 September 2019, the following parties had notified the
Group of a beneficial interest that represents 3% or more of the
Group’s issued share capital at that date:
Shareholder:-
Number of
shares held
Percentage
shareholding
%
Lion Trust Asset Management
57,951,955
19.44
Tink Taylor, Interim Chairman
29,776,667
Slater Investments Ltd
17,470,492
Highclere International Investors
12,444,575
Franklin Templeton Fund Management 12,000,000
9.99
5.86
4.18
4.03
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Report of the Directors continued
Future outlook
The Group provides cross-channel marketing technology
and services. Each of these areas has shown market growth
significantly above that of the UK economy. The Board believes
that our widespread brand recognition and strong product
will continue to present opportunities to expand and diversify
profitability in the coming year.
Listing
The Group’s ordinary shares have been traded on London
Alternative Investment Market (AIM) since 29 March 2011.
Canaccord Genuity are the Group’s nominated advisor and
together with Finncap and N+1 Singer are the joint brokers.
The closing mid-market share price at 30 June 2019 was
105.5p (2018: 75.0p).
Directors
The Directors shown below have held office during the whole
of the period from 1 July 2018 to the date of this report.
Related party transactions
Disclosures relating to related party transactions are set out in
note 26 to the Consolidated financial statements.
P Amin
F Beechinor-Collins (resigned 26 March 2019)
S Bird (resigned 9 August 2018)
B Huard (appointed 26 March 2019)
R Kellett-Clarke (resigned 3 April 2019)
M Patel
P A Simmonds (resigned 26 March 2019)
T Taylor
Indemnity of officers
The Group purchases Directors and officers insurance against
their costs in defending themselves in legal proceedings taken
against them in that capacity, and in respect of damages
resulting from the unsuccessful defence of any proceedings.
Financial instruments
Details of the Group’s risk management objectives and policies
together with its exposure to financial risk are set out in note 23
to the financial statements.
The purpose of the policies is to ensure that adequate cost-
effective funding is available to the Group and exposure to
financial risk – interest rate, liquidity and credit risk is minimised.
Product development
In the markets in which the Group operates, effective
development is vital to maintaining competitive advantage and
securing future income streams.
Going concern
After making appropriate enquiries, the Directors consider
that the Company and the Group has adequate resources to
continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis
in preparing the financial statements.
Events after the reporting period
There are no events after the date of this report or the date the
financial statements were approved by the Board of Directors
which impact on the figures as presented.
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Charitable and political donations
No charitable or political donations were made by the Company.
Charitable donations made by the Group in the year were £715
(2018: £1,694).
Employees
The number of employees and their remuneration is set out
in note 4.
Applications for employment by disabled persons are always
fully considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled
every effort is made to ensure that their employment with the
Group continues and that appropriate training is arranged. It is
the policy of the Group that the training, career development and
promotion of disabled persons should, as far as possible, be
identical to that of other employees.
The Group complies with all applicable labour laws in the
respective jurisdictions in which it operates.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the annual report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance
with International Financial Reporting Standards as adopted
by the European Union. Under company law the Directors must
not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of the Group for
that period. In preparing these financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether the Group and Parent Company financial
statements have been prepared in accordance with IFRSs
as adopted by the European Union subject to any material
departures disclosed and explained in the financial
statements and;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
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The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
and the Group’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and the Group and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Statement as to disclosure of information to Auditors
So far as the Directors are aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act
2006) of which the Group’s auditors are unaware, and each
Director has taken all the steps that he ought to have taken as
a Director in order to make himself aware of any relevant audit
information and to establish that the Group’s auditors are aware
of that information.
Auditors
The auditors, Jeffreys Henry LLP, will be proposed for
reappointment at the forthcoming Annual General Meeting.
On behalf of the Board
Milan Patel
Chief Executive Officer
15 October 2019
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Report of the independent auditor
Opinion
• We have audited the financial statements of dotdigital
Group Plc (the ‘parent Company’) and its subsidiaries (the
‘Group’) for the year ended 30 June 2019 which comprise
the consolidated income statement, consolidated statement
of comprehensive income, consolidated statement of
changes in equity, company statement of changes in equity,
consolidated statement of financial position, company
statement of financial position, consolidated statement of
cash flows, company statement of cash flows and notes to
the financial statements, including a summary of significant
accounting policies. The financial reporting framework that
has been applied in the preparation of the Group financial
statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. The financial reporting framework that has been
applied in the preparation of the parent Company financial
statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union, as applied in accordance with the provision of the
Companies House Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state
of the Group’s and of the parent Company’s affairs as at 30
June 2019 and of the Group’s profit for the year then ended;
the Group financial statements 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 as applied in accordance with the provisions
of the Companies Act 2006; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006;
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
•
•
the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is not appropriate;
or
the Directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group’s or the parent Company’s ability to
continue to adopt the going concern basis of accounting
for a period of at least 12 months from the date when the
financial statements are authorised for issue.
Our audit approach
Overview
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due
to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by
our audit.
• Capitalisation of development costs
• Valuation of investments and intangible assets
•
Revenue recognition and customer contracts
These are explained in more detail below.
Audit scope
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the
Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
•
•
•
We conducted audits of the complete financial information
of dotdigital Group plc, dotdigital EMEA Limited, dotdigital
Inc., dotmailer SA Pty Limited, dotmailer Development
Limited, dotmailer LLC, dotdigital SG Pte Limited, Dynmark
International Ltd, Donky Networks Ltd and Dynmark
S.p. z.o.o.
We performed specified procedures over certain account
balances and transaction classes at other Group companies.
Taken together, the Group companies over which we
performed our audit procedures accounted for 100% of
the absolute profit before tax (i.e. the sum of the numerical
values without regard to whether they were profits or losses
for the relevant reporting units) and 100% of revenue.
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Key audit matters
Key audit matter
Capitalisation of Development costs
During the year the Group capitalised internally generated
development costs of £5,507,539 (30 June 2018 - £4,376,645)
These capitalised costs are being amortised over five years.
The development cost additions represents resources the Group
has invested in the development of new innovative technology
products for marketing professionals.
The adjusted consolidated profit before tax, which is considered
by management to be a key metric and is discussed in their
discussion of KPIs, is directly impacted by the amount of costs
capitalised and the amounts included in the reconciliation of the
adjusted income measures.
The Directors have assessed whether the costs meet the
criteria for capitalisation and whether there are any indicators
of impairment.
Investments / Intangibles carrying value
The Company had investments of £15,147,156 at the year
ended 30 June 2019 (30 June 2018: £15,147,156).
The Group had intangible assets of £11,702,561 at the year
ended 30 June 2019 (30 June 2018: £9,787,354).
Impairment of assets (“IAS 36”) states that assets must be
assessed for indicators of impairment at each reporting period,
for all cash-generating units (“CGUs”). Should such indicators
exist the recoverable amount of the asset will be compared
to the carrying value, and if they carrying value exceeds
the recoverable amount, the difference is recorded as an
impairment loss.
The Group had goodwill of £9,679,608 at the year ended 30 June
2019 (30 June 2018: £9,679,608).
Revenue recognition and customer contracts
The Group provides goods and services for no charge. Under
IFRS 15, goods and services provided for no charge are required
to be recognised and accounted for as separate performance
obligations.
Management are satisfied that the prices specified and the
contracts for those services charged for are representative
of their stand-alone selling prices as they are referenced to a
standard rate card for the volumes purchased.
Management have adopted the modified retrospective transition
method and an adjustment of £2,298,428 has been made to
Group retained reserves.
dotdigital requested a third-party expert to perform the IFRS 15
transition impact study.
Further detail on the Group’s approach to the recognition of
revenue is set out within accounting policies note in note 2.
Details of IFRS 15 restatement can be found in note 33.
How our audit addressed the key audit matter
We focused on whether the costs capitalised met the criteria
for capitalisation and whether, those costs were classified
as ongoing projects or process improvements costs.
We considered whether the nature of the costs met the
criteria for the costs to be capitalised. We vouched a sample
of the costs capitalised that relate to specific projects and
created add on functions with the system. We agreed a
sample of the internal staff costs capitalised to supporting
calculations, time records and payroll calculations.
In both cases, we considered whether the nature of the
costs met the criteria for the costs to be capitalised.
We considered whether the Directors’ policy for the treatment
of such costs was reasonable and, on a sample basis,
assessed whether the costs included in the reconciliation
were in line with the Directors’ policy.
The net assets of the main subsidiary exceeds that of the
investment carrying value, supported by robust performance
with no going concern issues.
The analysis work undertaken by the Directors shows that the
Group is expected to remain cash generative and profitable
based on their technology. We have understood and assessed
methodology used by the Directors in this analysis and
determined it to be reasonable.
Intangibles are only assessed for impairment when indicators
of impairment exist. We have considered the life cycle, public
perception through the share price of the Company and the
fair value of intangibles held by the Company.
The Group capitalised intangibles relate to products that
dotdigital and Comapi is using to enhance its product we
consider it reasonable that no further impairment has been
recognised in the period.
We tested management’s assumption that no impairment
existed by carrying out sensitivity analysis through changing
the assumptions used and re-running the cash flow forecast.
We reviewed the work performed by the third-party expert on
the IFRS 15 transition impact study.
We reviewed a sample of contracts and discussed
arrangements in place with management to obtain an
understanding of the agreements in place.
We considered and challenged management in relation to the
accounting for such arrangements in the context of IFRS 15.
We tested a sample of revenue entries to agreed
arrangements with customers to evidence that the correct
accounting treatment had been applied.
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Report of the independent auditor continued
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£524,000 (30 June 2018: £545,000).
£165,000 (30 June 2018: £172,000).
How we determined it
Based on 5% of profit before tax.
Based on 1% of gross assets.
Rationale for
benchmark applied
We believe that profit before tax is a primary
measure used by shareholders in assessing the
performance of the Group whilst gross asset
values and revenue are a representation of the size
of the Group; both are generally accepted auditing
benchmarks.
We consider an asset-based measure to reflect
the nature of the Company which acts as a parent
holding company for the Group’s investments.
For each component in the scope of our Group audit, we
allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across
components was between £3,000 and £520,000.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £26,200
(Group audit) (30 June 2018: £27,250) and £8,250 (Company
audit) (30 June 2018: £8,600) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made
subjective judgments, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in
all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Group financial statements are a consolidation of 11
reporting units, comprising the Group’s operating businesses
and holding companies.
We performed audits of the complete financial information of
dotdigital Group plc, dotdigital EMEA Limited, dotdigital Inc.,
dotmailer SA Pty Limited, dotmailer Development Limited,
dotmailer LLC, dotdigital SG Pte Limited, Dynmark International
Ltd, Dynmark S.p z.o.o., and Donky Networks Ltd reporting units,
which were individually financially significant and accounted for
100% of the Group’s revenue and 100% of the Group’s absolute
profit before tax (i.e. the sum of the numerical values without
regard to whether they were profits or losses for the relevant
reporting units). We also performed specified audit procedures
over goodwill and other intangible assets, as well as certain
account balances and transaction classes that we regarded as
material to the Group at the 11 reporting units, one based in the
United States of America, one in Australia, one in Belarus, one in
Singapore and another in South Africa.
Other information
The Directors are responsible for the other information. The other
information comprises the information included in the annual
report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
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conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Other matters which we are required to address
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the parent Company and we
remain independent of the Group and the parent Company in
conducting our audit.
Our audit opinion is consistent with the additional report to the
audit committee.
Use of this report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Sanjay Parmar
Senior Statutory Auditor
For and on behalf of
Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London EC1V 9EE
15 October 2019
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course
of the audit:
•
•
the information given in the strategic report and the
Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
the strategic report and the Directors’ report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group
and parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent Company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by
law are not made; or
we have not received all the information and explanations
we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement set out on page 40, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or the parent Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit
45
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Financial
Statements
Contents
Financial statements
48 Consolidated income statement
48 Consolidated statement of comprehensive income
49 Consolidated statement of financial position
50 Company statement of financial position
51 Consolidated statement of changes in equity
52 Company statement of changes in equity
53 Consolidated statement of cash flows
53 Company statement of cash flows
54 Notes to the consolidated financial statements
80 Company information
47
Consolidated income statement
For the year ended 30 June 2019
Continuing operations
Revenue from contracts with customers
Cost of sales
Gross profit
Administrative expenses
Operating profit from continuing operations pre-share based
payments and exceptional costs
Share-based payments
Exceptional costs
Operating profit from continuing operations
Finance income
Profit before income tax from continuing operations
Income tax expense
Profit for the year from continuing operations
Discontinuing operations
(Loss)/Profit for the year from discontinued operations
Attributable to the owners of the parent:
Profit for the period from continuing operations
(Loss)/Profit for the period from discontinued operations
Profit for the period attributable to the owners of the Company
Earnings per share from all operations (pence per share)
Basic
Diluted
Adjusted Basic
Adjusted Diluted
Earnings per share from continuing operations (pence per share)
Basic
Diluted
Adjusted Basic
Adjusted Diluted
Earnings per share from discontinued operations (pence per share)
Basic
Diluted
Adjusted Basic
Adjusted Diluted
Notes
30.6.19
£’000
(Restated)
30.6.18
£’000
36,891
(4,625)
32,266
(22,849)
9,417
(450)
(279)
8,688
9
8,697
(683)
8,014
42,522
(4,377)
38,145
(26,380)
11,765
(565)
(179)
11,021
19
11,040
(58)
10,982
(2,457)
544
10,982
(2,457)
8,525
8,014
544
8,558
2.86
2.82
3.36
3.31
3.68
3.63
3.93
3.88
(0.82)
(0.81)
(0.57)
(0.57)
2.88
2.85
3.16
3.12
2.70
2.67
2.95
2.91
0.18
0.18
0.21
0.21
3
7
7
5
6
7
8
12
12
11
11
11
11
11
11
11
11
11
11
11
11
Consolidated statement of comprehensive income
For the year ended 30 June 2019
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations
Total comprehensive income attributable to:
Owners of the parent
Total comprehensive income for the year
Comprehensive income from continuing operations
Comprehensive income from discontinued operations
48
Notes
30.6.19
£’000
8,525
30.6.18
£’000
8,558
(42)
(20)
8,483
8,538
10,940
(2,457)
7,997
541
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 Consolidated statement of financial position
For the year ended 30 June 2019
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
Financial liabilities – borrowings
– Interest bearing loans
Total liabilities
Total equity & liabilities
Notes
30.6.19
£’000
30.6.18
£’000
13
14
15
17
18
19
20
20
20
20
20
24
21
9,680
11,702
1,037
22,419
12,222
19,320
31,542
53,961
1,490
6,791
(4,695)
720
16
37,161
9,680
9,787
1,046
20,513
12,953
15,005
27,958
48,471
1,490
6,791
(4,695)
661
(26)
32,331
41,483
36,552
1,377
1,697
11,096
10,217
5
11,101
12,478
53,961
5
10,222
11,919
48,471
The financial statements were approved and authorised for issue by the Board of Directors on 15 October 2019 and were
signed on its behalf by:
Milan Patel
Director
Company registration number: 06289659 (England and Wales)
49
Company statement of financial position
For the year ended 30 June 2019
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
30.6.19
£’000
30.6.18
£’000
16
17
18
19
20
20
20
21
15,147
15,147
808
594
1,402
16,549
1,490
6,791
720
3,515
15,147
15,147
882
646
1,528
16,675
1,490
6,791
661
5,761
12,516
14,703
4,033
4,033
1,972
1,972
16,549
16,675
The financial statements were approved and authorised for issue by the Board of Directors on 15 October 2019 and were
signed on its behalf by:
Milan Patel
Director
Company registration number: 06289659 (England and Wales)
50
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 Consolidated statement of changes in equity
For the year ended 30 June 2019
Balance as at 1 July 2017
Issue of share capital
Dividends
Transfer in reserves
Share-based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2018
Dividends
IFRS 15 restatement
Deferred tax asset on IFRS 15
Transfer in reserves
Share-based payment
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2019
Balance as at 1 July 2017
Issue of share capital
Dividends
Transfer in reserves
Share-based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2018
Dividends
IFRS 15 restatement
Deferred tax asset on IFRS 15
Transfer in reserves
Share-based payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Balance as at 30 June 2019
Called up
share capital
£’000
1,481
9
–
–
–
9
–
–
–
1,490
–
–
–
–
–
–
–
–
–
1,490
Retranslation
reserve
£’000
Reverse
acquisition
reserve
£’000
(46)
–
–
–
–
–
–
20
20
(26)
–
–
–
–
–
–
–
42
42
16
(4,695)
–
–
–
–
–
–
–
–
(4,695)
–
–
–
–
–
–
–
–
–
(4,695)
Retained
earnings
£’000
25,306
–
(1,627)
94
–
(1,533)
8,558
–
8,558
32,331
(1,903)
(2,837)
539
506
–
(3,695)
8,525
–
8,525
37,161
Other
reserves
£’000
305
–
–
(94)
450
356
–
–
–
661
–
–
–
(506)
565
59
–
–
–
720
Share
premium
£’000
6,290
501
–
–
–
501
–
–
–
6,791
–
–
–
–
–
–
–
–
–
6,791
Total equity
£’000
28,641
510
(1,627)
–
450
(667)
8,558
20
8,578
36,552
(1,903)
(2,837)
539
–
565
(3,636)
8,525
42
8,567
41,483
Share capital is the amount subscribed for shares at nominal value.
Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the
share issue expenses.
Retranslation reserve relates to the retranslation of foreign subsidiaries into the functional currency of the Group.
The reverse acquisition reserve relates to the adjustment required to account for the reverse acquisition in accordance
with International Financial Reporting Standards.
Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting
Standard 2 and shares repurchased in the year classified as treasury shares.
51
Company statement of changes in equity
For the year ended 30 June 2019
Balance as at 1 July 2017
Issue of share capital
Dividends
Transfer in reserves
Share-based payments
Transactions with owners
Profit for the year
Total comprehensive income
Balance as at 30 June 2018
Issue of share capital
Dividends
Transfer in reserves
Share-based payments
Transactions with owners
Profit for the year
Total comprehensive income
Balance as at 30 June 2019
Called up
share capital
£’000
1,481
Retained
earnings
£’000
2,239
Share
premium
£’000
6,290
Other
reserves
£’000
Total
equity
£’000
305
10,315
9
–
–
–
9
–
–
1,490
–
–
–
–
–
–
–
1,490
–
(1,627)
94
–
(1,533)
5,055
5,055
5,761
–
(1,903)
506
–
(1,397)
(849)
(849)
3,515
501
–
–
–
501
–
–
6,791
–
–
–
–
–
–
–
6,791
–
–
(94)
450
356
–
–
661
–
–
(506)
565
59
–
–
720
510
(1,627)
–
450
(667)
5,055
5,055
14,703
–
(1,903)
–
565
(1,338)
(849)
(849)
12,516
Share capital is the amount subscribed for shares at nominal value.
Retained earnings represents the cumulative earnings of the Company attributable to equity shareholders.
Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the
share issue expenses.
Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting
Standard 2 and shares repurchased in the year classified as treasury shares.
52
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 Consolidated statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Cash generated from operations
Tax paid
Net cash generated from operating activities
Net cash generated from continuing operating activities
Net cash generated from discontinued operating activities
Cash flows from investing activities
Purchase of subsidiary, net of cash acquired*
Purchase of intangible fixed assets
Purchase of tangible fixed assets
Sale of tangible fixed assets
Interest received
Net cash flows used in investing activities
Net cash generated from continuing investing activities
Net cash generated from discontinued investing activities
Cash flows from financing activities
Equity dividends paid
Loan repayments
Share issue
Net cash flows from financing activities
Net cash generated from continuing financing activities
Net cash generated from discontinued financing activities
(Decrease)/Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
* Cash acquired £157,884.
Notes
29
30
30
30.6.19
£’000
(Restated)**
30.6.18
£’000
12,493
(207)
12,286
13,288
(1,002)
–
(5,617)
(456)
–
19
(6,054)
(5,168)
(886)
(1,903)
(14)
–
(1,917)
(1,903)
(14)
4,315
15,005
19,320
11,220
(1,010)
10,210
10,413
(203)
(9,578)
(4,471)
(475)
4
9
(14,511)
(4,452)
(10,059)
(1,627)
(5)
510
(1,122)
(1,117)
(5)
(5,423)
20,428
15,005
** The comparatives above have been restated to reflect the re-classification between the net cash flows used in investing
activities and the net cash generated from operating activities and continuing and discontinuing operations.
Company statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Cash generated from operations
Net cash generated from operating activities
Cash from investing activities
Purchase of investments
Net cash flows from investing activities
Cash flows from financing activities
Equity dividends paid
Share issue
Net cash flows from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
29
30.6.19
£’000
30.6.18
£’000
1,851
1,851
10,909
10,909
–
–
(1,903)
–
(1,903)
(52)
646
594
30
30
(9,737)
(9,737)
(1,627)
510
(1,117)
55
591
646
53
Notes to the consolidated financial statements
For the year ended 30 June 2019
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 39.
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 Company
The Group has applied IFRS 9 Financial Instruments and
IFRS 15 Revenue from Contracts with Customers for the
first time for the period commencing 1 July 2018.
Impact of initial application of IFRS 9 Financial Instruments
In the current year, the Group has applied IFRS 9 Financial
Instruments (as revised in July 2014) and the related
consequential amendments to other IFRS Standards that
are effective for an annual period that begins on or after
1 January 2018. IFRS 9 Financial Instruments, which
replaces IAS 39 Financial Instruments: Recognition and
Measurement, impacts the classification and measurement
of the Group’s financial instruments and requires certain
additional disclosures. The transition provisions of IFRS 9
allow an entity not to restate comparatives.
IFRS 9 introduced new requirements for:
1
2
3
The classification and measurement of financial
assets and financial liabilities,
Impairment of financial assets, and
General hedge accounting.
IFRS 9 has not had a material impact in the presentation
of the accounts of the Group.
Impact of application of IFRS 15 Revenue from
Contracts with Customers
In the current year, the Group has applied IFRS 15 Revenue
from Contracts with Customers (as amended in April 2016)
which is effective for an annual period that begins on or
after 1 January 2018. IFRS 15 introduced a 5-step approach
to revenue recognition. Far more prescriptive guidance has
been added in IFRS 15 to deal with specific scenarios.
The Group’s accounting policies for its revenue streams are
disclosed in detail in note 2 below. The Group has applied
IFRS 15 in accordance with the modified retrospective
transitional approach. In addition to providing more
extensive disclosures for the Group’s revenue transactions,
the application of IFRS 15 has had an impact on the
financial position and/or financial performance of the
Group which is disclosed in note 33.
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 2018 and have not
been early adopted. The full impact of their adoption has
not yet been fully assessed; however, management do
not expect the changes to have a material effect on the
Financial Statements unless otherwise indicated:
Reference
IAS 1 and
IAS 8
IAS 19
IAS 28
Summary
Title
Definition of material Clarifies the definition of ‘material’
and align the definition used in the
Conceptual Framework and the
standards.
Application date
of standard
Periods beginning on
or after 1 Jan 2020
Application
date of Group
1 July 2020
Plan Amendment,
Curtailment or
Settlement
Investment in
Associates and
Joint Ventures
Amendments in Plan Amendment,
Curtailment or Settlement
Periods beginning on
or after 1 January 2019
1 July 2019
Clarifies that an entity applies IFRS
9 Financial Instruments to long-term
interests in an associate or joint venture
that form part of the net investment in
the associate or joint venture but to
which the equity method is not applied.
Periods beginning on
or after 1 January 2019
1 July 2019
IFRS 9
Financial Instruments Amendment regarding termination
rights in order to allow measurement
at amortised cost even in the case of
negative compensation payments.
Annual improvements
IFRS 3, IFRS 11,
IAS 12
and IAS 23
Annual Improvements
to IFRS Standards
2015–2017 Cycle
Periods beginning on
or after 1 January 2019
1 July 2019
Periods beginning on
or after 1 January 2019
1 July 2019
IFRS 16
Leases
Original issue
Periods beginning on
or after 1 January 2019
1 July 2019
54
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
New Standards and interpretations not yet adopted
IFRS 16 Leases was issued in January 2016 but is not
mandatory for the year ending 30 June 2019 and has not
been adopted early by the Group. As a consequence of this
new standard, this will result in all leases being recognised
on the balance sheet by lessees, as the distinction between
operating and finance leases is removed. Thereby resulting
in an asset and a financial liability to pay rentals being
recognised on the Statement of Financial Position.
As at the reporting date, the Group has non-cancellable
operating lease commitments of £5.4m (see note 22),
which will be recognised on a straight-line basis as an
expense in the income statement. At the date of transition,
being 1 July 2019, and in the year after transition, there will
be an impact on the Group’s consolidated income statement
where the fixed rental expense (currently recognised within
administrative expenses) is replaced by a depreciation
charge and an interest expense. This will lead to a reduction
in operating profit as a result of removing the operating
lease expense net of the new leased asset depreciation
charge. The Group expects to recognise right-of-use assets
of approximately £5.5m and lease liabilities of £5.5m (after
adjustments for prepayments and accrued lease payments
recognised as at 30 June 2019). The Group expects a
reduction in operating cost of approximately £1.1m with
a corresponding increase in depreciation of £1.1m and an
increase of £0.5m in finance costs, resulting in an overall
reduction in profit after tax by approximately by £0.5m
for the year ended 30 June 2020 as a result of adopting
the new rules.
Changes in Accounting Policies and Disclosures
(a) New and amended standards adopted by the Group
The Group has applied any applicable new standards,
amendments to standards and interpretations that
are mandatory for the financial year beginning on or
after 1 January 2018. However, none of them has a
material impact on the Group’s Consolidated Financial
Statements.
(b) Impact of IFRS 15 – Revenue from contracts
with customers
In the current year, the Group has applied IFRS 15
Revenue from Contracts with Customers (as amended
in April 2016) which is effective for an annual period that
begins on or after 1 January 2018. IFRS 15 introduced
a 5 step approach to revenue recognition. Far more
prescriptive guidance has been added in IFRS 15 to deal
with specific scenarios.
The Group’s accounting policies for its revenue streams
are disclosed in detail in note 2 below. The Group
has applied IFRS 15 in accordance with the modified
retrospective transitional approach. Apart from providing
more extensive disclosures for the Group’s revenue
transactions, the application of IFRS 15 has not had
a significant impact on the current financial position
and/or financial performance of the Group. However,
via the implementation of the modified retrospective
transitional approach this did have a significant impact
on the financial position of the Group. Further details
can be seen in Note 33.
The financial statements are presented in sterling (£),
rounded to the nearest thousand pounds.
Basis of consolidation
In the period ended 2009 the Company acquired via a
share for share exchange the entire issued share capital
of dotdigital EMEA (previously dotmailer Limited), whose
principal activity is that of providing SaaS via a leading
cross-channel marketing automation platform and managed
services to digital marketing professionals.
Under IFRS 3 ‘Business combinations’ the dotdigital EMEA
(previously 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, dotdigital EMEA (previously dotmailer
Limited). The following accounting treatment has been
applied in respect of the reverse acquisition:
• The assets and liabilities of the legal subsidiary,
dotdigital EMEA (previously 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 dotdigital EMEA
(previously dotmailer Limited) to 30 April 2008. However,
in accordance with IFRS3 ‘Business combinations’,
the equity structure appearing in the consolidated
financial statements reflects the equity structure of the
legal parent dotdigital Group Plc, including the equity
instruments issued under the share exchange to affect
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.
55
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
2. Accounting policies continued
Subsidiaries
A subsidiary is an entity whose operating and financing
policies are controlled by the Group. Subsidiaries are
consolidated from the date on which control was transferred
to the Group. Subsidiaries cease to be consolidated from
the date the Group no longer has control. Intercompany
transactions, balances and unrealised gains on transactions
between Group companies have been eliminated on
consolidation.
The Group applies the acquisition method to account
for business combinations. In the statement of financial
position, the acquiree’s identifiable assets and liabilities are
initially recognised at their fair values at the acquisition date.
As a result of applying reverse acquisition accounting
since 30 January 2009, the consolidated IFRS financial
information of dotdigital Group Plc is a continuation of
the financial information of dotdigital EMEA (previously
dotmailer Limited).
Revenue recognition
Revenue comprises the fair value of the consideration
received or receivable for the sale of services in the ordinary
course of the Group’s activities. Revenue is shown net
of value added tax returns, rebates and discounts after
eliminating sales within the Group.
The Group recognises revenue when the amount of revenue
can be reliably measured and it is probable that the future
economic benefits will flow to the entity. The Group bases
its estimates on historical results, taking into consideration
the type of customer, the type of transaction and the
specifics of each arrangement.
The Group sells cross-channel marketing services to other
businesses, and services are either provided on a usage
basis or fixed price bespoke contract. All revenue is from
contracts signed with new customers and upgrades and
additional functional recurring revenue sold to existing
contracted clients. Revenue from contracts is recognised
under percentage of completion method based on a
percentage of services performed to date as a percentage
of the total services to be performed.
Professional services at no charge: The Group sells
professional services to its customers and there are
occasions when these services are provided at no cost
as part of the contract sold. The services provided for
no charge are recognised and accounted for as separate
performance obligations when the service occurs. The
amount allocated to the services is deducted from the
contract value and the remainder of the contract value is
spread evenly over the term of the contract.
Prepaid contracts: The Group sells 12-, 24- and 36-month
contracts to its customers. This revenue is recognised
monthly over the period of the contract. Where a customer
prepays their contract, this is recognised over the period of
the contract irrespective of materiality.
Term Contract billing: The Group raises the first invoice to
its new customers when the service agreement is signed.
Occasionally, the service does not start in the same month
as when the service agreement is signed but is invoiced
in the month where the service agreement is signed. The
revenue is then recognised over the period of the contract
irrespective of materiality.
56
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 and is allocated
to cash generating units.
Under IFRS 3 “Business Combinations”, goodwill arising
on acquisitions is not subject to amortisation but is subject
to annual impairment testing. Any impairment is recognised
immediately in the income statement and not subsequently
reversed.
Investments in subsidiaries
Investments are held as non-current assets at cost less any
provision for impairment. Where the recoverable amount of
the investment is less than the carrying amount, impairment
is recognised.
Intangible assets
Intangible assets are recorded as separately identifiable
assets and recognised at historical cost less any
accumulated amortisation. These assets are amortised
over their useful economic lives of four to five years, with
the charge included in administrative expenses in the
income statement.
Intangible assets are reviewed for impairment annually.
Impairment is measured by determining the recoverable
amount of an asset or cash generating unit (CGU) which is
the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset
or CGU. For the purpose of impairment testing, assets that
cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash
inflows of other assets or CGUs.
•
Domain names
Acquired domain names are shown at historical cost.
Domain names have a finite life and are carried at
cost less accumulated amortisation. Amortisation is
calculated using straight-line method to allocate the cost
of domain names over their useful lives of four years.
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
• Software
Acquired software and websites are shown at historical
cost. They have a finite life and are carried at cost less
accumulated amortisation. Amortisation is calculated
using straight-line method to allocate the cost of software
and websites over their useful lives of four years.
•
• Product development
Product development expenditure is capitalised when
it is considered that there is a commercially and
technically viable product, the related expenditure
is separately identifiable and there is a reasonable
expectation that the related expenditure will be
exceeded by future revenues. Following initial
recognition, product developments are carried at
cost less any accumulated amortisation and any
accumulated impairment losses. The useful lives of
these intangible assets are assessed to have a finite life
of five years. Amortisation is charged on assets with
finite lives, and until economic benefit can be received
and recognised, this expense is taken to the income
statement and useful lives are reviewed on an annual
basis. Amortisation is charged from the point when the
asset is available for use.
Other development expenditures that do not meet
these criteria are recognised as an expense as incurred.
Capitalised development costs are recorded as intangible
assets and amortised from the point at which they are
ready for use on a straight-line basis over their useful life.
Costs incurred on development projects (relating to
the design and testing of new or improved products)
are recognised as intangible assets when the following
criteria are fulfilled:
–
–
–
–
–
It is technically feasible to complete the intangible
asset so that it will be available for use or resale;
Management intends to complete the intangible
asset and use or sell it;
There is an ability to use or sell the intangible asset;
It can be demonstrated how the intangible asset
will generate possible future economic benefits;
Adequate technical, financial and other resource
to complete the development and to use or sell
the intangible asset are available; and
–
The expenditure attributable to the intangible asset
during its development can be reliably measured.
• Technology
Technology represents the cost that would be incurred
to build the entire Comapi platform had the acquisition
not occurred. The useful life of this intangible asset is
assessed to have a finite life of 10 years. Amortisation
is charged on assets with finite lives, and until economic
benefit can be received and recognised, this expense
is taken to the income statement and useful lives are
reviewed on an annual basis. Amortisation is charged
from the point when the asset is available for use.
• Customer relationships
This represents the value of high-value customer
contracts within Comapi. The useful life of this
intangible asset is assessed to have a finite life of
three years. Amortisation is charged on assets with
finite lives, and until economic benefit can be received
and recognised, this expense is taken to the income
statement and useful lives are reviewed on an annual
basis. Amortisation is charged from the point when the
asset is available for use.
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the
carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those
assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not
generate cash flows that are independent from other
assets, the Group estimates the recoverable amount
of the cash generating unit to which the asset belongs.
An intangible asset with an indefinite useful life is
tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Property, plant and equipment
Tangible non-current assets are stated at historical cost
less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items.
Subsequent costs are included in the assets’ carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
are associated with the item will flow to the Company
and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the
income statement during the financial period in which
they are incurred. Depreciation is provided at the following
rates in order to write off each asset over its estimated
useful life and is based on the cost of assets less residual
value. Significant components of individual assets are
assessed and if a component has a useful life that is
different from the remainder of that asset, that component
is depreciated separately.
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.
57
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
2. Accounting policies continued
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.
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.
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
(‘FVPL’), which are initially measured at fair value.
Financial assets are classified into the following
specified categories: financial assets at FVPL,
‘amortised cost’ or ‘fair value through other
comprehensive income’ (‘FVOCI’). The classification
depends on the nature and purpose of the financial
assets and is determined at the time of recognition.
Financial assets are assessed for indicators of
impairment at each balance sheet date. Financial assets
are impaired where there is objective evidence that, as
a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated
future cash flows of the investment have been
impacted.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually, the Group recognises lifetime expected
credit losses (‘ECL’) when there has been a significant
increase in credit risk since initial recognition. However,
if the credit risk on the financial instrument has not
increased significantly since initial recognition, the
Group measures the loss allowance for that financial
instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses
that will result from all possible default events over
the expected life of a financial instrument. In contrast,
12-month ECL represents the portion of lifetime ECL that
is expected to result from default events on a financial
instrument that are possible within 12 months after the
reporting date.
On derecognition of a financial asset measured at
amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration
received and receivable is recognised in profit or loss.
• 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.
• Financial assets
• Trade receivables
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
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
58
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
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.
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.
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:
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.
(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
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 estimates and judgements
The Group makes certain estimates and assumptions
regarding the future. Estimates and judgements are
continually evaluated based on historical experience
and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ
from these estimates and assumptions. The estimates
and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
Judgements
(a) Capitalisation of development costs
Our business model is underpinned by our email and
data-driven cross-channel marketing automation
platform, dotmailer. Internal activities are continually
undertaken to enhance and maintain the product in a bid
to stay ahead of our competition. Management review
the work of developers during the period and make the
following judgements:
–
Internal work relating to product development
is reviewed against IAS 38 criteria and will be
capitalised if management feel the criteria have
been met.
59
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
2. Accounting policies continued
–
Internal work relating to the maintenance of existing
products is expensed to the income statement and
accounted for in payroll costs.
(b) Valuation of intangibles
The recognition of business combinations requires
the excess of the purchase price of acquisitions over
the net book value of assets acquired to be allocated
to the assets and liabilities of the acquired entity. The
Group makes judgements and estimates in relation
to the fair value allocation of the purchase price. If
any unallocated portion is positive it is recognised
as goodwill and if negative, it is recognised in the
consolidated income statement.
Judgement is required in determining the fair value
of identifiable assets, liabilities and contingent assets
and liabilities assumed in a business combination and
the fair value of the consideration payable. Calculating
the fair values involves the use of significant estimates
and assumptions, including expectations about future
cash flows, discount rates and the lives of assets
following purchase.
Estimates and assumptions
(a) Estimated impairment of goodwill
The Directors have carried out a detailed impairment
review in respect of goodwill. The Group assesses
at each reporting date whether there is an indication
that an asset may be impaired, by considering the net
present value of discounted cash flow forecasts which
have been discounted at 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 13 to the Financial Statements.
At the period end, based on the assumptions, there
was no indication of impairment to the carrying value
of goodwill.
(b) Share-based compensation
Key management believe that there will not be only
one acceptable choice for estimating the fair value of
share-based payment arrangements. The judgements
and estimates that management apply in determination
of the share-based compensation are summarised
as follows:
–
–
Selection of a valuation model
Making assumptions used in determining the
variables used in a valuation model
i
expected life
ii expected volatility
iii expected dividend yield
iv
interest rate
Further detail on the estimates and assumptions we
make in our share-based compensation are included in
note 28 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
The Group performs ongoing credit evaluations of
its customers and grant credit based upon past
payment history, financial condition and anticipated
industry conditions. Customer payments are regularly
monitored and the Group recognises lifetime
expected credit losses (“ECL”) when there has been
a significant credit risk since initial recognition
based upon specific situations and overall industry
conditions. However, if the credit risk on the trade
receivables has not increased significantly since initial
recognition, the Group measures the loss allowance
at an amount equal to 12-month ECL. Hence the
provision is maintained for potential credit losses based
upon management’s assessment of the expected
collectability of all accounts receivable. In making this
assessment, management take into consideration (i)
any circumstances of which we are aware regarding a
customer’s inability to meet its financial obligations and
(ii) our judgements as to potential prevailing economic
conditions in the industry and their potential impact on
the Group’s customers.
60
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
3. Segmental reporting
dotdigital’s single line of business remains the provision of data-driven cross-channel marketing automation. The chief
operating decision maker considers the Group’s segments to be by geographical location, this being EMEA, US and APAC
operations and by business activity, this being core Engagement Cloud and CPaaS as shown below:
Geographical revenue and results
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
EMEA
£’000
42,215
32,039
5,672
5,441
52,100
16,771
30.6.2019
US
£’000
APAC
£’000
Total
£’000
6,957
6,099
2,812
2,657
1,717
2,938
2,113
1,926
389
385
51,285
40,064
8,873
8,483
144
732
53,961
20,441
Revenue from external customers is attributed to the geographical segments noted above based on the customers’
location. There were no customers who account for more than 10% revenue (2018: none).
All revenue is from contracts signed with new customers and upgrades and additional functional recurring revenue sold
to existing contracted clients. Revenue from contracts is recognised under percentage of completion method based on a
percentage of services performed to date as a percentage of the total services to be performed.
Income statement
Revenue
Gross profit
Profit/(loss) before income tax
Total comprehensive income attributable
to the owners of the parent
Financial position
Total assets
Net current assets
Business activity revenue and results
Income statement
Revenue
Gross profit
Profit/(loss) before income tax
Total comprehensive income attributable
to the owners of the parent
Financial position
Total assets
Net current assets/(liabilities)
EMEA
£’000
36,563
28,224
7,993
7,450
45,497
15,280
30.6.2018
US
£’000
5,257
4,578
1,877
1,738
2,130
1,804
APAC
£’000
1,274
1,218
(627)
(650)
Total
£’000
43,094
34,020
9,243
8,538
844
652
48,471
17,736
Core
£’000
30.6.2019
CPaaS*
£’000
42,522
38,145
11,040
10,940
8,763
1,919
(2,167)
(2,457)
Total
£’000
51,285
40,064
8,873
8,483
52,263
21,177
1,698
(736)
53,961
20,441
61
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
3. Segmental reporting continued
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/(liabilities)
dotmailer
£’000
30.6.2018
Comapi*
£’000
36,891
32,266
8,697
7,997
6,203
1,754
546
541
Total
£’000
43,094
34,020
9,243
8,538
44,612
17,944
3,859
(208)
48,471
17,736
*The numbers included within Comapi are from the date of acquisition – 21 November 2017.
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 product
Development and system engineers
Administration
30.6.19
£’000
17,029
1,728
354
19,111
30.6.19
6
177
100
63
346
30.6.18
£’000
14,149
1,562
291
16,002
30.6.18
5
150
71
53
279
During the year the Group also capitalised staff-related costs of £4,924,505 (2018: £4,023,222) in relation to internally
generated development costs.
5. Exceptional costs
Continuing exceptional costs incurred in the year relate to the ongoing acquisition costs of Comapi of £58,824 (2018:
£208,805) and amortisation of acquired intangibles of £120,000 (2018: £70,000).
Discontinued exceptional costs in the year relate to the amortisation of acquired intangibles of £401,709 (2018: £78,110)
and impairment of acquired intangibles of £344,235 (2018: Nil)
6. Net finance income
Finance income:
Deposit account interest
30.6.19
£’000
30.6.18
£’000
19
19
9
9
62
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 7. Operating profit
Costs by nature
Profit from continuing operations has been arrived after charging:
Direct marketing
Outsourcing and other costs
Total cost of sales
Staff-related costs (inc Directors emoluments)
Operating leases: Land and buildings
Operating leases: Other
Audit remuneration
Amortisation of intangibles
Depreciation charge
Legal, professional and consultancy fees
Computer expenditure
Bad debts
Foreign exchange (gains)/losses
Travel and subsistence costs
Office running
Staff welfare
Other costs
Management charge
Total administration costs
30.6.19
£’000
2,625
1,752
4,377
30.6.19
£’000
17,374
1,162
39
42
2,520
436
386
2,364
753
15
576
75
454
982
(798)
30.6.18
£’000
2,482
2,143
4,625
30.6.18
£’000
15,232
886
38
59
1,934
482
423
2,031
22
117
481
109
396
639
–
26,380
22,849
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
8. 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
Tax charge from continuing operations
Tax charge from discontinued operations
30.6.19
£’000
20
30.6.18
£’000
8
47
5
72
30.6.19
£’000
129
(71)
58
58
290
348
37
4
49
30.6.18
£’000
259
426
685
683
2
685
63
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
8. Income tax expense continued
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 19% (2018: 19%)
Effects of:
Expenses not deductible
Research and development enhanced claim
Expenditure permitted on exercising options
Overseas tax losses
Capital allowances in excess of depreciation
Total income tax
30.6.19
£’000
8,873
1,686
151
(2,327)
–
(70)
689
129
30.6.18
£’000
9,243
1,756
137
(1,908)
(217)
72
419
259
Deferred tax was calculated using the rate 19% (2018: 19%). For further details on deferred tax see note 24.
Taxation for each region is calculated at the rates prevailing in the respective jurisdiction.
A reduction in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were
substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively
enacted on 6 September 2016. This will reduce the Company’s future current tax charge accordingly. UK deferred tax
assets and liabilities have been recognised at the rate applying in the period they are expected to unwind.
9. Profit of Parent Company
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent Company is not
presented as part of these financial statements. The parent Company’s loss for the financial year was £848,539 (2018:
profit: £5,055,276).
10. Dividends
Amounts recognised as distributions to equity holders in the period.
Paid dividend for year end 30 June 2019 of 0.64p (2018: 0.505p) per share
Proposed dividend for the year end 30 June 2019 of 0.67p (2018: 0.64p) per share
30.6.19
£’000
1,903
1,997
30.6.18
£’000
1,505
1,907
The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
11. Earnings per share
Earnings per share data is based on the consolidated profit using and the weighted average number of shares in issue of
the parent Company. Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders
by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion
of all dilutive potential ordinary shares. Adjusted earnings per share is based on the consolidated profit deducting the
acquisition related exceptional costs and share-based payment.
A number of non-IFRS adjusted profit measures are used in this annual report and financial statements. Adjusting items are
excluded from our headline performance measures by virtue of their size and nature, in order to reflect management’s view of
the performance of the Group. Summarised below is a reconciliation between statutory results to adjusted results. The Group
believes that alternative performance measures such as adjusted EBITDA are commonly reported by companies in the markets
in which it competes and are widely used by investors in comparing performance on a consistent basis without regard to factors
such as depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when
acquisitions have occurred), or based on factors which do not reflect the underlying performance of the business. The adjusted
profit after tax earnings measure is also used for the purpose of calculating adjusted earnings per share.
64
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
Reconciliations to earnings figures used in arriving at adjusted earnings per share are as follows:
From all operations
Profit for the year attributable to the owners of the parent
Impairment of acquisition-related intangible fixed asset (see note 14)
Amortisation of acquisition-related intangible fixed asset (see note 14)
Other exceptional costs
Share-based payment
Adjusted profit for the year attributable to the owners of the parent
Adjusted profit for the year attributable to the owners
of the parent for continuing operations
Adjusted profit for the year attributable to the owners
of the parent for discontinued operations
30.6.19
£’000
8,525
344
522
59
565
10,015
11,726
30.6.18
£’000
8,558
–
148
209
450
9,365
8,743
(1,711)
622
Management does not consider the above adjustments to reflect the underlying business performance. The other
exceptional costs relate to ongoing acquisition costs of Comapi.
From all operations
Basic EPS
Profit for the year attributable to the owners of the parent
Adjusted Basic EPS
Adjusted 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
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
From continung operations
Basic EPS
Profit for the year attributable to the owners of the parent
Adjusted Basic EPS
Adjusted 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
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
From discontinued operations
Basic EPS
Loss for the year attributable to the owners of the parent
Adjusted Basic EPS
Adjusted loss for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
Loss for the year attributable to the owners of the parent
Adjusted Diluted EPS
Adjusted loss for the year attributable to the owners of the parent
30.6.19
Weighted
average
number of
shares
Per share
Amount
Pence
Earnings
£’000
8,525
298,030,565
10,015
–
298,030,565
4,390,083
8,525
302,420,648
2.86
3.36
–
2.82
10,015 302,420,648
3.31
30.6.19
Weighted
average
number of
shares
Per share
Amount
Pence
Earnings
£’000
10,982
298,030,565
11,726
–
298,030,565
4,390,083
10,982
302,420,648
3.68
3.93
–
3.63
11,726 302,420,648
3.88
30.6.19
Weighted
average
number of
shares
Per share
Amount
Pence
Earnings
£’000
(2,457) 298,030,565
(0.82)
(1,711) 298,030,565
4,390,083
–
(0.57)
–
(2,457) 302,420,648
(0.81)
(1,711) 302,420,648
(0.57)
65
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
30.6.18
Weighted
average
number of
shares
Per share
Amount
Pence
Earnings
£’000
8,558
296,596,304
9,365
–
296,596,304
3,728,052
8,558
300,324,356
2.88
3.16
–
2.85
9,365 300,324,356
3.12
30.6.18
Weighted
average
number of
shares
Per share
Amount
Pence
Earnings
£’000
8,014
296,596,304
8,743
–
296,596,304
3,728,052
8,014
300,324,356
2.70
2.95
–
2.67
8,743 300,324,356
2.91
30.6.18
Weighted
average
number of
shares
Per share
Amount
Pence
Earnings
£’000
544
296,596,304
622
–
296,596,304
3,728,052
544
300,324,356
0.18
0.21
–
0.18
622 300,324,356
0.21
30.6.19
Shares
298,030,565
302,420,648
30.6.18
Shares
296,596,304
300,324,356
11. Earnings per share continued
From all operations
Basic EPS
Profit for the year attributable to the owners of the parent
Adjusted Basic EPS
Adjusted 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
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
From continuing operations
Basic EPS
Profit for the year attributable to the owners of the parent
Adjusted Basic EPS
Adjusted 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
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
From discontinued operations
Basic EPS
Profit for the year attributable to the owners of the parent
Adjusted Basic EPS
Adjusted 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
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
Weighted average number of shares
Basic EPS
Diluted EPS
66
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
12. Continuing and discontinuing operations
The analysis between continuing and discontinued operation is as follows:
Year ended 30 June 2019
Revenue
Cost of sales
Gross profit
Administrative expense
Shared-based payments
Exceptional costs
Operating profit
Finance income
Profit before income tax
Income tax expense
Profit for the year
Year ended 30 June 2018
Revenue
Cost of sales
Gross profit
Administrative expense
Shared-based payments
Exceptional costs
Operating profit
Finance income
Profit before income tax
Income tax expense
Profit for the year
Continuing
operations
£’000
42,522
(4,377)
38,145
(26,380)
(565)
(179)
11,021
19
11,040
(58)
10,982
Continuing
operations
£’000
36,891
(4,625)
32,266
(22,849)
(450)
(279)
8,688
9
8,697
(683)
8,014
Discontinuing
operations
£’000
8,763
(6,844)
1,919
(3,340)
–
(746)
(2,167)
–
(2,167)
(290)
(2,457)
Discontinuing
operations*
£’000
6,203
(4,449)
1,754
(1,130)
–
(78)
546
–
546
(2)
544
* The numbers included within discontinued operations relate to Comapi from the date of acquisition being
21 November 2017.
13. Goodwill
Group
Cost
At 1 July
Additions
At 30 June
Amortisation
At 1 July
Impairment
At 30 June
Net book value
30.6.19
£’000
13,192
–
13,192
3,512
–
3,512
9,680
Total
£’000
51,285
(11,221)
40,064
(29,720)
(565)
(925)
8,854
19
8,873
(348)
8,525
Total
£’000
43,094
(9,074)
34,020
(23,979)
(450)
(357)
9,234
9
9,243
(685)
8,558
30.6.18
£’000
4,121
9,071
13,192
3,512
–
3,512
9,680
On 21 November 2017, the Group acquired all the voting rights of Comapi for a cash consideration of £10.7m (which includes
the payment of loans in Comapi) in exchange for all Comapi shares, with a potential consideration of £1.2m in share options
for the management team, dependent on them achieving specific performance targets over a two-year post acquisition period
and remaining with the business. Comapi’s business is the provision of omni-channel messaging and cloud communication.
The Directors believe the acquisition will:
• Extend dotdigital’s marketing automation platform to provide an industry-leading solution offering fully integrated
cross-channel and conversational commerce support to marketers
• Enable dotdigital to deliver aligned conversational messaging across channels including email, mobile push, SMS,
Facebook messenger, Apple business messenger, Twitter and live chat
• Enable dotdigital customers to meet consumer demand for a more personalised communication experience and
• Position dotdigital as the most advanced platform on the market and make dotdigital more relevant in the strategic
mobile-first Asian market.
67
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
13. Goodwill continued
Goodwill of £9.1m was recognised on the acquisition, being the excess of the purchase consideration over the provisional
fair value of net assets acquired as set out below and represents Comapi’s platform, key customer relationships, employee
knowledge and skills and the acceleration of bringing the technology to our platform rather than building in-house.
Goodwill is allocated to the Group’s two cash generating units identified, that being Core and CPaaS. The goodwill addition
in the year ended 30 June 2018 relates to the acquisition of Comapi and the goodwill at the beginning of the period relates
to dotdigital.
Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more
frequently if there are indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated,
at acquisition, to cash generating units (CGUs) that are expected to benefit from that business combination.
The carrying amount of goodwill relates to the Group’s two trading activities and business segments. This has been tested
for impairment during the current period by comparison with the recoverable amounts of the CGU. Recoverable amounts
for CGUs are based on the higher of value in use and fair value less costs to sell. The recoverable amounts of the CGU have
been determined from value in use calculations. These calculations use pre-tax cash flow projections based on financial
budgets approved by management covering a five-year period. 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 6.2% (2018: 10%). The valuations indicate sufficient
headroom such that a reasonably possible change in key assumptions would not result in impairment of goodwill.
Customer
relationships
£’000
Technology
£’000
Computer
software
£’000
Internally
generated
development
costs
£’000
Domain
names
£’000
1,205
–
1,205
78
402
344
824
1,200
–
1,200
70
120
–
190
806
105
911
611
86
–
697
15,286
5,508
20,794
7,957
2,749
–
10,706
381
1,010
214
10,088
37
4
41
31
1
–
32
9
Customer
relationships
£’000
Technology
£’000
Computer
software
£’000
Internally
generated
development
costs
£’000
Domain
names
£’000
–
–
1,205
1,205
–
–
78
78
–
–
1,200
1,200
–
–
70
70
497
94
215
806
320
76
215
611
10,351
4,377
558
15,286
6,009
1,891
57
7,957
1,127
1,130
195
7,329
16
–
21
37
16
4
11
31
6
Totals
£’000
18,534
5,617
24,151
8,747
3,358
344
12,449
11,702
Totals
£’000
10,864
4,471
3,199
18,534
6,345
1,971
431
8,747
9,787
14. Intangible assets
Group
Cost
At 1 July 2018
Additions
At 30 June 2019
Amortisation
At 1 July 2018
Amortisation for the year
Impairment for the year
At 30 June 2019
Net book value
At 30 June 2019
Group
Cost
At 1 July 2017
Additions
Introduced on acquisition
At 30 June 2018
Amortisation
At 1 July 2017
Amortisation for the year
Introduced on acquisition
At 30 June 2018
Net book value
At 30 June 2018
68
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
Development cost additions represents resources the Group has invested in the development of new, innovative and
ground-breaking technology products for marketing professionals. This platform allows them to create, send and automate
marketing campaigns. Following development of the products the Group intends to licence the use of the platform.
Technology represents the cost that would be incurred to build the entire Comapi platform had the acquisition not occurred.
Customer relationships represent the value of high-value customer contracts within Comapi. At the year-end an impairment
review was conducted on both whereby it was found that technology required no impairment due to the full integration of
Comapi. However, customer relationships did result in an impairment due to a reduction in the anticipated lifetime of the
contracts.
15. Property, plant and equipment
Group
Short
leasehold
£’000
Fixtures &
fittings
£’000
Computer
equipment
£’000
Cost
At 1 July 2018
Additions
Exchange differences
At 30 June 2019
Depreciation
At 1 July 2018
Depreciation for the year
Exchange differences
At 30 June 2019
Net book value
At 30 June 2019
Group
Cost
At 1 July 2017
Additions
Disposals
Introduced on acquisition
Exchange differences
At 30 June 2018
Depreciation
At 1 July 2017
Depreciation for the year
Eliminated on disposals
Introduced on acquisition
Exchange differences
At 30 June 2018
Net book value
At 30 June 2018
Totals
£’000
3,255
456
8
3,719
2,209
465
8
2,682
Totals
£’000
2,426
475
(46)
402
(2)
3,255
1,393
495
(41)
362
–
2,209
612
32
2
646
340
61
1
402
244
643
133
3
779
481
71
2
554
225
2,000
291
3
2,294
1,388
333
5
1,726
568
1,037
Short
leasehold
£’000
Fixtures &
fittings
£’000
Computer
equipment
£’000
534
88
(28)
50
(1)
643
379
91
(24)
34
1
481
1,393
341
(18)
284
–
2,000
800
342
(17)
264
(1)
1,388
499
46
–
68
(1)
612
214
62
–
64
–
340
272
162
612
1,046
69
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
16. Investments
Company
Cost
At 1 July
Additions
At 30 June
Amortisation
At 1 July and 30 June
Net book value
At 30 June
Shares in
Group
undertakings
30.6.19
£’000
Shares in
Group
undertakings
30.6.18
£’000
18,666
–
18,666
8,706
9,960
18,666
3,519
3,519
15,147
15,147
The Group’s or the Company’s investments at the balance sheet date in the share capital of companies include
the following:
Subsidiaries
dotdigital EMEA Limited
Nature of business
Cross-channel marketing automation
dotsurvey Limited
dotsearch Europe Limited
dotcommerce Limited
doteditor Limited
dotSEO Limited
dotagency Limited
dotdigital Inc
dotdigital APAC Pty Limited
dotmailer Development Ltd
dotmailer SA Pty
dotmailer LLC
dotdigital SG Pte Limited
Dynmark International Ltd
Dynmark S.p z.o.o
Donky Networks Ltd
Dormant
Development hub
Dormant
Dormant
Dormant
Dormant
Cross-channel marketing automation
Cross-channel marketing automation
Holding company
Development hub
Development hub
Cross-channel marketing automation
Omnichannel communication platform
Omnichannel communication platform
Omnichannel communication platform
Class of share
Ordinary
Ordinary A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Proportion of
voting power
held %
100
100
100
100
100
100
100
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 dotdigital Inc, dotmailer SA Pty, dotmailer LLC, dotdigital APAC Pty Limited, dotdigital SG Pte. Limited and
Dynmark S.p. z.o.o were incorporated in England and Wales. dotdigital Inc was incorporated in Delaware (US), dotdigital
APAC Pty Limited was incorporated in New South Wales (Australia), dotmailer SA Pty was incorporated in South Africa,
dotdigital SG Pte. Limited was incorporated in Singapore, dotmailer LLC was incorporated in the Republic of Belarus and
Dynmark S.p. z.o.o. was incorporated in Poland.
17. Trade and other receivables
Current:
Trade receivables
Less: Provision for impairment of trade receivables
Trade receivables – net
Other receivables
Amounts owed by Group undertakings
VAT
Tax receivables
Prepayments and contract income
Group
Company
30.6.19
£’000
30.6.18
£’000
30.6.19
£’000
(restated)
30.6.18
£’000
9,155
(999)
8,156
218
–
–
392
3,456
8,677
(403)
8,274
151
–
–
312
4,216
12,222
12,953
–
–
–
–
692
14
–
102
808
–
–
–
–
743
12
–
127
882
Further details on the above can be found in note 23. Included within prepayments is an amount of £662,912 (2018:
£852,504) in relation to deferred commission which is considered to be long term.
70
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
Group
Company
30.6.19
£’000
19,320
19,320
30.6.18
£’000
15,005
15,005
18. Cash and cash equivalents
Bank accounts
Further details on the above can be found in note 23.
19. Called up share capital
Allotted, issued, fully paid number
298,030,565 (2018: 298,030,565)
20. Reserves
Group
As at 1 July 2018
Dividends
Profit for the year
Transfer of reserves
IFRS 15 reclassification
IFRS 15 Deferred tax
adjustment
Other comprehensive income:
Currency translation
Share-based payments
Retained
earnings
£’000
32,331
(1,903)
8,525
506
(2,837)
539
–
–
Share
premium
£’000
6,791
–
–
–
–
–
–
–
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
–
–
–
–
Balance as at 30 June 2019
37,161
6,791
(4,695)
Group
As at 1 July 2017
Issue of share capital
Dividends
Profit for the year
Transfer of reserves
Other comprehensive income:
Currency translation
Share-based payments
Retained
earnings
£’000
25,306
–
(1,627)
8,558
94
–
–
Balance as at 30 June 2018
32,331
Share
premium
£’000
6,290
501
–
–
–
–
–
6,791
Company
As at 1 July 2018
Issue of share capital
Dividends
Loss for the year
Transfer of reserves
Share-based payments
As at 30 June 2019
Reverse
acquisition
reserve
£’000
(4,695)
–
–
–
–
–
–
(4,695)
Retained
earnings
£’000
5,761
–
(1,903)
(849)
506
–
3,515
Nominal
value
£0.005
Retranslation
reserve
£’000
(26)
–
–
–
–
–
42
–
16
Retranslation
reserve
£’000
(46)
–
–
–
–
20
–
(26)
Share
premium
£’000
6,791
–
–
–
–
–
6,791
30.6.19
£’000
594
594
30.6.19
£’000
1,490
1,490
Other
reserves
£’000
661
–
–
(506)
–
–
–
565
720
Other
reserves
£’000
305
–
–
–
(94)
–
450
661
Other
reserves
£’000
661
–
–
–
(506)
565
30.6.18
£’000
646
646
30.6.18
£’000
1,490
1,490
Totals
£’000
35,062
(1,903)
8,525
–
(2,837)
539
42
565
39,993
Totals
£’000
27,160
501
(1,627)
8,558
–
20
450
35,062
Totals
£’000
13,213
–
(1,903)
(849)
–
565
720
11,026
71
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
20. Reserves continued
Company
As at 1 July 2017
Issue of share capital
Dividends
Profit for the year
Transfer of reserves
Share-based payments
As at 30 June 2018
21. Trade and other payables
Current:
Trade payables
Amounts owed to Group undertakings
Social security and other taxes
Other payables
VAT
Accruals and contract liabilities
Retained
earnings
£’000
2,239
–
(1,627)
5,055
94
–
5,761
Share
premium
£’000
6,290
501
–
–
–
–
6,791
Other
reserves
£’000
305
–
–
–
(94)
450
Totals
£’000
8,834
501
(1,627)
5,055
–
450
661
13,213
Group
Company
30.6.19
£’000
30.6.18
£’000
30.6.19
£’000
30.6.18
£’000
3,975
–
81
150
1,162
5,728
6,184
–
480
60
989
2,504
11,096
10,217
59
3,932
–
–
–
42
4,033
Further details on liquidity and interest rate risk can be found in note 23.
22. 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
1,243
4,052
5,295
Land &
buildings
£’000
1,094
1,310
2,404
30.06.19
Others
£’000
44
31
75
30.06.18
Others
£’000
45
55
100
Operating leases represent rents payable by the Group for its office properties and car leases. 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.
72
15
1,913
–
–
–
44
1,972
Totals
£’000
1,287
4,083
5,370
Totals
£’000
1,139
1,365
2,504
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019
23. Financial instruments and risk management
The Group’s activities expose it to a number of financial risks that include credit risk, liquidity risk, currency risk and interest
rate risk. These risks and the Group’s policies for managing them have been applied consistently during the year and are
set out below.
The Group holds no financial or other non-financial instruments other than those utilised in the working operations of the
Group and that are listed in this note. It is the Group’s policy not to trade in derivative contracts.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument rate risk arises, are as follows:
– Trade receivables
– Cash and cash equivalents
– Trade and other payables
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
Amounts owed to Group undertakings
Accrued liabilities and other payables
Group
Company
30.6.19
£’000
30.6.18
£’000
30.6.19
£’000
30.6.18
£’000
12,222
19,320
31,542
3,975
–
7,121
11,096
12,953
15,005
27,958
6,184
–
4,033
10,217
808
594
1,402
59
3,932
42
4,033
882
646
1,528
15
1,913
44
1,972
The fair value of the financial assets and financial liabilities is equal to their carrying values. All financial assets are
categorised as loans and receivables and all financial liabilities are categorised as financial liabilities at amortised costs.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and
whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and policies to the Group’s risk committee. The Board receives
quarterly reports from the Risk Committee through which it reviews the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Company’s competitiveness and flexibility. Further details regarding these policies are set out below:
Interest rate risk
The Group’s interest rate risk arises from interest-bearing assets and liabilities. The Group has in place a policy of
maximising finance income by ensuring that cash balances earn a market rate of interest offsetting where possible cash
balances, and by forecasting and financing its working capital requirements. As at the reporting date the Group was not
exposed to any movement in interest rates as it has no external borrowings and therefore is not exposed to interest rate
risk. No sensitivity analysis has been prepared.
The Group’s working capital requirements are managed through regular monitoring of the overall cash position and
regularly updated cash flow forecasts to ensure there are sufficient funds available for its operations.
Liquidity risk
The Group’s working capital requirements are managed through regular monitoring of the overall position and regularly
updated cash flow forecasts to ensure there are funds available for its operations. Management forecasts indicate no new
borrowing facilities will be required in the upcoming financial period.
Trade and other payables of £5,287,000 (2018: £7,233,000) are expected to mature in less than a year.
73
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
23. Financial instruments and risk management continued
Credit risk
Credit risk arises principally from the Group’s trade receivables, as there are no trade receivables within the Company, which
comprise amounts due from customers. Prior to accepting new customers a credit check is obtained. As at 30 June 2019
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
30.6.19
£’000
6,408
521
2,226
9,155
30.6.19
£’000
27
–
972
999
30.6.19
£’000
403
621
(5)
(20)
999
30.6.18
£’000
6,172
720
1,785
8,677
30.6.18
£’000
–
–
403
403
30.6.18
£’000
502
40
(72)
(67)
403
The Group minimises its credit risk by profiling all new customers and monitoring existing customers of the Group for
changes in their initial profile. The level of trade receivables older than the average collection period consisted of a
value of £2,053,528 (2018: £2,041,922) of which £972,221 (2018: £402,985) was provided for. The Group felt that the
remainder would be collected post year end as they were with long-standing relationships, and the risk of default is
considered to be low and write-offs due to bad debts are extremely low. The Group has no significant concentration of
credit risk, with the exposure spread over a large number of customers.
The credit risk on liquid funds is low as the counterparts are banks with high credit ratings assigned by international
credit rating bodies. The majority of the Company’s cash holdings are held at NatWest Bank which has a BBB+
credit rating.
The carrying value of both financial assets and liabilities approximates to fair value.
Capital policy
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to
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 (2018: £nil) and amounts payable over one year are
nil (2018: £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 realign
the capital structure, the Group may adjust when dividends are paid to shareholders, return capital to shareholders, issue
new shares or borrow from lenders.
74
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 24. Deferred tax
As at 1 July
IFRS 15 adjustment
Current year provision
Provision on recognition of intangibles on acquisition
The deferred tax liability above comprises the following temporary differences:
Acquired intangibles
Capital allowances in excess of depreciation
R&D relief in excess of amortisation
Share option relief
IFRS 15 prior year deferred tax
30.6.19
£’000
1,697
(539)
219
–
1,377
30.6.19
£’000
264
65
1,919
(332)
(539)
1,377
30.6.18
£’000
814
–
426
457
1,697
30.6.18
£’000
429
178
1,204
(114)
–
1,697
Deferred tax provision relates to taxes to be levied by the same authority on the same entity expected to be settled at the
same time. As such deferred tax assets and liabilities have been offset.
25. Capital commitments
The Company and Group have no capital commitments as at the year end.
26. Related party disclosures
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
Group
The following transactions were carried out with related parties:
30.6.19
£’000
30.6.18
£’000
Sale of services
Cadence Performance
Cloudcall Group Plc
Entity under common directorship
(up to 31 March 2019)
Entity under common directorship
(up to 31 March 2019)
Email marketing
services
Email marketing and
cross-channel services
Year end balances arising from sale of services
Cloudcall Group Plc
Entity under common directorship
(up to 31 March 2019)
Email marketing and
cross-channel services
Directors
Aggregate emoluments
Ex-gratia payment
Company contributions to money purchase pension scheme
Share-based payments from the LTIP options granted
Directors’ pay summary does not include Non-Executive Directors.
2
12
14
1
1
30.6.19
£’000
835
–
21
389
1,245
2
16
18
16
16
30.6.18
£’000
701
40
26
145
912
75
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
26. Related party disclosures continued
Information in relation to the highest paid Director is as follows:
Salaries
Other benefits
Pension costs
Share-based payments on the LTIP options granted
Company
The following transactions were carried out with related parties:
Year end balances arising from sales/purchase of services
dotdigital EMEA Limited Subsidiary
Payables
30.6.19
£’000
435
12
13
289
749
30.6.18
£’000
395
12
13
145
565
30.6.19
£’000
30.6.18
£’000
651
651
(5,350)
(5,350)
The receivables and payables are unrestricted in nature and bear no interest. No provisions are held against receivables
from related parties.
Loans to/from related parties
dotdigital EMEA Limited Subsidiary
As at 1 July
Loans advanced
Loans repaid
27. Ultimate controlling party
30.6.19
£’000
30.6.18
£’000
(2,559)
51
(2,072)
(4,580)
9,950
97
(12,606)
(2,559)
There is no ultimate controlling party of the Group. dotdigital Group Plc acts as the parent Company to dotdigital EMEA
Limited, dotsearch Europe Limited, dotdigital Inc, dotdigital APAC Pty Limited, dotagency Limited (Dormant), dotsurvey
Limited (Dormant), dotSEO Limited (Dormant), dotcommerce Limited (Dormant), doteditor Limited (Dormant), dotmailer
Developments Limited, dotmailer SA Pty, dotmailer LLC, dotdigital SG Pte. Limited, Dynmark International Ltd, Dynmark S.p.
z.o.o. and Donky Networks Ltd.
28. Share-based payment transactions
The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted after
7 November 2002. The expense recognised for share-based payment made during the year is £565,000 (2018: £450,000).
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 2019 had a WAEP of 49.16p (2018: 9.43p) and a weighted average
contracted life of 3.66 years (2018: 4.16 years) and their exercise prices ranged from 28.5p to 68.50p. All share options are
settled in form of equity issued.
Outstanding at the beginning of the period
Granted during the year
Forfeited/cancelled during the period
Exchanged for shares
Outstanding at the end of the period
Exercisable at the end of the period
30.06.19
30.6.18
No. of options
3,732,262
2,305,000
(1,609,198)
–
4,428,064
748,065
WAEP
9.43p
50p
50p
0p
49.16p
45.05p
No. of options
2,540,145
2,984,197
–
(1,792,080)
3,732,262
517,080
WAEP
33.35p
0.5p
0p
28.46p
9.43p
34.57p
The weighted average share price at the date of the exercise for share options exercised during the period was £nil
(2018: 28.46p).
76
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 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
24 October
2018
2,305,000
77.50p
0.50p
5 years
1.23%
30%
1%
52.70p
19 December
2017
1,375,000
85.95p
0.50p
5 years
1.33%
30%
1%
65.03p
20 June
2017
230,985
68.50p
68.50p
5 years
1.33%
30%
1%
12.04p
25 November
2015
809,160
40.50p
40.25p
5 years
1.33%
30%
1%
6.46p
28 November
2014
1,525,000
29.00p
28.50p
5 years
1.35%
30%
0.4%
5.33p
Expected volatility was determined by calculating the historical volatility of the Group’s share price from the date it listed
to the grant date of the share option. The expected life used in the model is based on management’s best estimate, for the
effects of non-transferability, exercise restrictions and behavioural considerations.
The share options granted on 24 October 2018 were following the approval of the LTIP scheme at the AGM on 19 December
2017 and the end-to-end awards that were granted to key personnel.
29. Group reconciliation of profit before corporation tax to cash generated from operations
Group
Company
Current
Profit before tax from all operations
Currency revaluation
Amortisation
Depreciation
Exceptional costs
Finance lease non-cash movement
IFRS 15 reclassification
Gain/(loss) on disposal of fixed assets
Share-based payments
Finance income
Decrease/(Increase) in trade receivables
Increase in trade payables
Cash generated from operations
30. Group cash and cash equivalents
30.6.19
£’000
8,873
42
3,358
465
344
12
(2,837)
–
565
(19)
10,803
811
879
12,493
(restated)
30.6.18
£’000
9,243
20
1,971
495
148
–
–
3
450
(9)
12,321
(3,638)
2,537
11,220
30.6.19
£’000
30.6.18
£’000
(849)
–
–
–
–
–
–
–
565
–
(284)
74
2,061
1,851
5,055
–
–
–
–
–
–
–
450
–
5,505
3,528
1,876
10,909
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 2017
As at 30 June 2018
As at 30 June 2019
Group
£’000
20,428
15,005
19,320
Company
£’000
591
646
594
77
Notes to the consolidated financial statements continued
For the year ended 30 June 2019
31. Project development
During the period the Group incurred £5,507,539 (2018: £4,376,645) in development investments. All resources utilised
in development have been capitalised as outlined in the accounting policy governing this area.
32. Post balance sheet events
There are no post balance sheet events which impact the Group’s financial statements.
33. IFRS 15 restatement
The Group has adopted IFRS 15 as at 1 July 2018 and applied the modified retrospective approach. Comparatives for the
12 months ended 30 June 2018 have not been restated and the cumulative impact on adoption has been recognised as
a decrease to retained earnings with the corresponding increase in current liabilities at 1 July 2018 as follows:
Retained earnings:
Revenue
Deferred tax reserve
Total impact at 1 July 2018
Current liabilities:
Trade and other payables
Non-current liabilities:
Deferred tax
Total impact at 1 July 2018
01.07.18
£’000
2,837
(539)
2,298
2,837
(539)
2,298
IFRS 15 has had an impact on retained earnings as outlined below.
Professional services at no charge: The Group sells professional services to its customers and there are occasions
when these services are provided at no cost as part of the contract sold. Historically, the Group did not recognise these
services as they were fully discounted. Under IFRS 15, the services provided for no charge are recognised and accounted
for as separate performance obligations when the service occurs. The amount allocated to the services is deducted from
the contract value and the remainder of the contract value is spread evenly over the term of the contract. This revised
treatment in respect of professional services provided at no cost has accelerated the recognition of revenue and resulted in
lower deferred income at adoption on 1 July 2018.
Prepaid contracts: The Group sells 12-, 24- and 36- month contracts to its customers. This revenue is normally recognised
monthly over the period of the contract. Historically there have been instances where a customer prepays their contract
and due to its immaterial nature, the revenue was recognised at the date of invoice. Under IFRS 15, the prepaid contracts
are recognised over the period of the contract irrespective of materiality.
Term Contract billing: The Group raises the first invoice to its new customers when the service agreement is signed.
Occasionally, the service does not start in the same month as when the service agreement is signed. Historically, the
Group has recognised the revenue in the month invoiced due to its immaterial nature. Under IFRS 15, the upfront billing
is recognised over the period of the contract irrespective of materiality.
78
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 All operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Share-based payments
Exceptional costs
Operating profit from all operations
Finance income
Profit before income tax from all operations
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinuing operations
Profit for the period attributable to the owners
of the parent
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
Financial liabilities – borrowings:
- Interest bearing loans
Total liabilities
Total equity and liabilities
Year ended 30 June 2019
Amounts pre
IFRS 15
£’000s
Transition
Adjustment
£’000s
In period
adjustment
£’000s
Amounts as
reported
£’000s
51,422
(11,221)
40,201
(29,720)
(565)
(925)
8,991
19
9,010
(374)
11,093
(2,457)
8,636
9,680
11,702
1,037
22,419
12,196
19,320
31,516
53,935
1,490
6,791
(4,695)
720
16
39,570
43,892
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,298)
(2,298)
1,916
1,916
(539)
(539)
8,122
2,837
5
8,127
10,043
53,935
–
2,837
2,298
–
(137)
–
(137)
–
–
–
(137)
–
(137)
26
(111)
–
(111)
–
–
–
–
26
–
26
26
–
–
–
–
–
(111)
(111)
–
–
137
–
137
137
26
51,285
(11,221)
40,064
(29,720)
(565)
(925)
8,854
19
8,873
(348)
10,982
(2,457)
8,525
9,680
11,702
1,037
22,419
12,222
19,320
31,542
53,961
1,490
6,791
(4,695)
720
16
37,161
41,483
1,377
1,377
11,096
5
11,101
12,478
53,961
79
Company information
For the year ended 30 June 2019
Directors:
P Amin
M Patel
F Beechinor-Collins (resigned 26 March 2019)
R Kellett-Clarke (resigned 3 April 2019)
P A Simmonds (resigned 26 March 2019)
T Taylor
B Huard (appointed 26 March 2019)
Company Secretary:
G Kasparian
Registered office:
No. 1 London Bridge
London
SE1 9BG
Registered number:
06289659 (England and Wales)
Auditors:
Jeffreys Henry LLP
Statutory Auditor
Finsgate 5-7 Cranwood Street
London
EC1V 9EE
Nomad/broker:
Canaccord Genuity
41 Lothbury
London
EC2R 7AE
Joint broker:
Finncap
60 New Broad Street
London
EC2M 1JJ
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
Solicitors:
BPE Solicitors LLP
St James House
St James Square
Cheltenham
GL50 3PR
80
FINANCIAL STATEMENTSdotdigital Group PlcAnnual Report 2018/2019 Our clients
81
EMEA Head Office
Americas Head Office
APAC Head Office
London
No.1 London Bridge
London
SE1 9BG
United Kingdom
New York
333 7th Avenue
Floor 18
New York
NY 10001
USA
Sydney
Level 4
213 Clarence Street
Sydney, 2000
Australia