Annual Report 2019/2020
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 – Remedy
12 Chief Executive Officer’s report and
financial review
20 Case study – Science in Sport
22 Risks, impact and mitigations
27 Corporate social responsibility report
Governance
30 Board of Directors
32 Corporate governance report
35 Audit Committee report
36 Remuneration Committee report
41 Report of the Directors
44 Report of the independent auditor
Financial statements
50 Consolidated income statement
50 Consolidated statement of comprehensive income
51 Consolidated statement of financial position
52 Company statement of financial position
53 Consolidated statement of changes in equity
54 Company statement of changes in equity
55 Consolidated statement of cash flows
55 Company statement of cash flows
56 Notes to the consolidated financial statements
82 Company information
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.
£47.4m
*Revenue
h 12% from £42.5m
£13.1m
*Adjusted operating
profit
h 11% from £11.8m
£18.2m
*Adjusted EBITDA
£25.4m
Cash position
h 24% from £14.7m
h 31% from £19.3m
* Adjusted for continuing operations.
Annual Report 2019/2020
Annual Report 2019/2020
1
1
STRATEGIC REPORT
Chairman’s report
“The strong fundamentals of the
business have been vital in navigating
the situation, but it is our colleagues
that have been the driving force behind
our continued progress.”
It remains difficult to predict how the
pandemic will play out, but we have shown
our ability to weather the most challenging
of commercial environments. There is no
room for complacency, but having started
the new financial year well and with demand
for our products continuing to grow, we can
look to the future with measured confidence.
The strong fundamentals of the business
have been vital in navigating the situation,
but it is our colleagues that have been the
driving force behind our continued progress.
On behalf of the Board I would like to thank
them all for their efforts.
Strategic progress
2019/20 represents the first full financial
year since the Group and its platform were
rebranded as dotdigital and Engagement
Cloud respectively to reflect better the
complementary, omni-channel nature of the
offering. The progress the Group has made
since that pivot in strategy – both in building
out the product and expanding its reach
to new and exciting markets around the
world – has been remarkable. As a relative
newcomer to the business, I have been
hugely impressed by the ability of our teams
to meet the evolving needs of marketeers in
an increasingly digital world, underpinned by
an unwavering commitment to innovation
and an ambitious, supportive and inclusive
company culture.
As a result of a lot of hard work, we now
have one of the most comprehensive, easy-
to-use, reliable and secure digital marketing
platforms available, and are constantly
looking at ways in which we can enhance
it further. Beyond email marketing, we now
offer SMS, push notifications, live chat and
social ad functionality all in one solution.
The global appeal of the platform is evident
from the increase in the contribution of non-
UK sales this year.
In further validation of the strategic
developments that have taken place
at dotdigital in the past two years, the
Company was for the first time recognised
as a “strong performer” by Forrester in its
Email Marketing Service Providers Q2 2020
report. As one of the “13 providers that
matter most”, the report said dotdigital
“presented itself for the first time in this
study as earnest, honest, and winning clients
at a rate unmatched by all of its larger
competitors… Marketers who sell direct in
their emails should consider this marketing
cloud alternative”. As an influential voice
in the industry, this award is an important
endorsement of our competitive edge in
the space.
Michael O’Leary
Non-Executive Chairman
Overview
One of dotdigital’s key strengths is its
contracted recurring revenue model and
there can be few more rigorous stress
tests for it than the outbreak of a global
pandemic. From the onset we have adapted
well and delivered a strong set of results
with progress made against all of our
strategic pillars despite the disruption in Q4.
Our continued double-digit revenue
growth clearly demonstrates the value
that organisations attach to our platform
which, for many, has been a vital tool for
continuing to drive sales and maintain
customer engagement through the time
of the pandemic.
2
dotdigital Group Plc People
Despite the challenging economic backdrop,
we continued to hire through the year
to support our growth ambitions. While
we have strengthened teams across
the Group, we have been most active in
recruiting to build out an already exceptional
international team, ensuring we have
the very best senior talent available with
knowledge and experience of working in
specific overseas markets. More detail is
available in the geographic progress section
of the Chief Executive’s Review.
At Board level, I joined in January of this
year as Non-Executive Chairman, having
spent more than 35 years working with
listed companies with a focus on software
and technology. In May, we welcomed Liz
Richards to the Board as Independent Non-
Executive Director and Chair of the Audit
Committee. Liz has had a highly successful
career as CFO and Chair of Audit and brings
with her a wealth of PLC experience that will
be of great benefit to the Group.
Moving forwards, we will continue to hire
in line with our international expansion
plans, adding new skills and increasing
management bandwidth where necessary,
while also investing in the development of
our existing colleagues around the world.
Dividend
The Board has agreed to maintain a
progressive dividend in line with Group
EBITDA growth. Therefore, subject to
approval at the AGM in December 2020,
the Board proposes that the Group will
pay a final dividend of 0.83p per ordinary
share (2019: 0.67p).
Michael O’Leary
Non-Executive Chairman
17 November 2020
“We wanted to use dotdigital to understand how to better communicate
with our customers in a conceptual and personal manner. The RFM
personas have enabled us to refine our customer database and build
improved segments while delivering tailored campaigns for existing and
new customers alike.”
Diana Uribe | Digital Specialist at Caruso’s Natural Health
3
Annual Report 2019/2020 STRATEGIC REPORT
Empowering customers with intelligent tools and people
dotdigital Engagement Cloud empowers multidisciplinary teams to
plan, test, execute and optimise omni-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 omni-
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 personalise,
segment, and automate revenue-generating
campaigns in minutes with easy, time-saving
tools. We help marketers scale quickly to
maximise 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.
4
dotdigital Group Plc
Engagement Cloud
Connecting data to channels via intelligent tools
Data
Our addressable market increases with quality and quantity of data inputs
Other CRM systems, Other e-commerce Integrations, Data capture
Empowerment layer
Better control and use of data combined with smart features helps customers achieve their desired outcomes
Features
Our fast and easy-to-use features enable advanced marketing
Channels
Increased number of outputs maximises the usefulness and reach
Email
SMS
Social
Ads
Mobile
Website
Chat
Offline
Annual Report 2019/2020
5
5
STRATEGIC REPORT
Investment case
dotdigital is a leading, global, omni-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
Software as a service
Email marketing automation has a
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 the next five
years complemented with omni-
channel features
New messaging channels as
customers create omni-channel
experiences
Focused on both B2B and
B2C digital experiences for
our customers
Rapid product innovation
supporting up and cross-sell
opportunities
International growth based on
proven blueprint
Brand success extended through
Predictable and transparent
financial model
Very diverse customer base with
no customer accounting for more
than 1% of revenue
Profitable with significant cash
balances and no debt
global strategic partners
High levels of recurring revenues
Strong contracted revenues
6
dotdigital Group Plc
“We are empowering our customers through
our commitment to platform innovation and
investment in international growth.”
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 omni-channel and Artificial
success
Intelligence
Strong Non-Executive Board with
Creative marketing approach
experiences of scaling businesses
Ability to supplement with sensible
to empower customers
of this size
technology acquisitions
Flexible, extendable and effective
Wider management team with
Attract further world-class partners
product that drives retention and
the motivation to continue the
to increase the addressable market
beats the competition
profitable growth story
New geographic markets with
Unique industry position with many
All employees aligned to the
greater potential than UK alone
competitors distracted
strategic priorities of geographic
growth, product innovation
and building strong strategic
partnerships
Annual Report 2019/2020
7
STRATEGIC REPORT
Thoughts of the Chief Executive Officer
“It is with great pleasure that I share with you my thoughts on the
past 12 months. In a time of global market uncertainty, we have remained
focused on innovation through continuous investment in research and
development, the move to being a data-centric omni-channel messaging
platform, and hiring new talent across all our international hubs to increase
management bandwidth and help scale our regions. This has set the
foundation for future growth.”
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,
continued operations growth remained at
double-digit levels, during a time of macro-
economic uncertainty where our customers
were pausing for breath trying to understand
how they needed to adapt their business
models during the global lockdowns. As we
entered the last few months of the financial
year, we saw some normalisation in the
number of new customers coming on board
and growth in existing customer spend.
As part of our focus on the environment,
this year we were able to commission a
project to make us ISO 14001 compliant
and have made progress in this area. We
have been able to reach carbon neutral a
year earlier than planned, which has been
a fantastic achievement.
I would like to take this opportunity to thank
our people who have adapted fantastically
to new ways of working so quickly and their
continued commitment to the success of
the business.
I hope that you enjoy reading more about
our strategic progress in this annual report.
We have continued to deliver on our vision
of expanding our geographic footprint and
increasing our addressable market through
the integrations we have built into our key
strategic partners in both the e-commerce
and CRM spaces. Global awareness of
the dotdigital brand and what it can do
is growing.
We have continued to pursue our goal of
optimising both our sales and customer
success processes, listening to feedback
from our customers, investing in talent to
support their needs, educating the market
on omni-channel and building functionality
within the platform that helps customers
bring their data together for relevancy and
personalisation. The platform has evolved to
be the best-of-breed player within the data-
driven, omni-channel, marketing automation
space and continues to empower our
customers to create engagement with
all their recipients. Next year will see an
increase in investment to further solidify
our competitive advantage in the data
platform market.
By strengthening the foundations of
the business, both from a platform and
people perspective, we are better placed
to capitalise on the opportunities to increase
our addressable market and sustain
long-term growth. I am confident about
the business and our direction of travel.
This year has been unique with the global
pandemic creating market uncertainties,
however our business model, focused
around our three pillars of growth and
strong fundamentals in the business, has
helped us navigate these turbulent times.
Milan Patel
Chief Executive Officer
17 November 2020
8
98.0%
2019: 97.4%
2018: 97.0%
Customer Support Satisfaction
score (CSAT)
98.9%
2019: 98.5%
2018: 98.1%
Email delivery rate
15mins
2019: 26 mins
2018: 38 mins
Mean email delivery time
21.1bn
2019: 16.5bn
2018: 14.9bn
Message sending volume
dotdigital Group Plc 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.
Our non-financial KPIs provide us with an indication of our platform’s ability
and measurement of how successful we are in supporting our customers.
Both elements are crucial to the success of our business. Employee
remuneration is specifically linked to these KPIs.
Financial
Revenue (continued)
We aim to deliver double-digit
organic revenue growth from
continuing operations.
£47.4m
£42.5m
£36.9m
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.
£25.4m
£13.1m
£11.8m
£19.3m
£15.0m
£9.4m
+15%
+15%
+12%
+14%
+25%
+11%
2018
2019
2020
2018*
2019
2020
2018
2019
2020
Strategic**
ARPC
We aim to continue to grow Average
Revenue Per Customer (ARPC).
Recurring revenue
We aim to have recurring revenues
of over 90%.
International
We aim to expand revenue from
outside the UK.
£966
£845
£1,083
89%
91%
85%
31%
29%
26%
+18%
+14%
+12%
2018
2019
2020
2018
2019
2020
2018
2019
2020
* after spending £10.7m on the acquisition of Comapi, paid in full using cash resources.
** does not include the acquisition of Comapi.
*** adjusted operating profit excludes share-based payment, exceptional costs and amortisation of intangibles on acquisition.
9
Annual Report 2019/2020 STRATEGIC REPORT
Case study
Remedy integrates dotdigital automated
solutions to strengthen its digital presence
and transform customer engagement
Founded in 2012, by Melbourne-based couple
Sarah and Emmet Condon, Remedy has become the
market leader in fermented beverages in Australia
and New Zealand. With a mission to make tasty
and healthy drinks available to people everywhere,
Remedy has since expanded overseas into the UK,
US, Canada, and Singapore.
The brand has grown in popularity, building a loyal following for
Remedy Kombucha starting in health food stores, independent
supermarkets, and cafes; recently expanding to convenience
stores and major supermarkets. Besides Kombucha, Remedy
also produces Coconut Water Kefir, Switchel, Tepache and Soda,
all with no sugar naturally.
Challenge
With the growing popularity and expansion of its brand and
customer database, Remedy recognised an opportunity to better
engage with consumers in the digital space, with tailored and
personalised content.
15%
increase in revenue
from emails
10
dotdigital Group Plc
dotdigital Group Plc
Solution
In early 2019, Remedy partnered with dotdigital to explore its
automation functionalities and solutions. As well as being integrated
with their e-commerce platform, Magento, dotdigital’s capability
to capture, funnel, and segment customer data was one of the
main reasons driving this decision. Currently, Remedy is running
automated customer engagement programs such as a welcome
series, abandoned cart notifications, product education programs,
and review email campaigns.
Results
According to Tom Melenhorst, Digital Marketing & Ecommerce
Manager at Remedy, partnering with dotdigital has enabled Remedy
to effectively implement a comprehensive engagement strategy
with its customers. dotdigital’s automated platform helped Remedy
to use email to its maximum potential, deliver consistent messaging,
and engage with their customers with highly relevant content.
Utilising dotdigital Engagement Cloud enabled the company to
access real-time data and run better-personalised campaigns,
giving a facelift to its digital efforts.
“Another benefit of using dotdigital is its flawless onboarding
process, accompanied by their user-friendly platform. Over the last
year, the segmentation and quality research of the data through
different automated programs has allowed us to have an in-depth
understanding of our customer preferences, ultimately targeting
them with personalised products and campaigns,” commented Tom.
The user-friendly interface made it easy for Remedy to work around
the content, channel it into customised automated programs,
and streamline the electronic direct mail (EDM) process. By
using dotdigital, the company has not only enhanced its customer
experience but also built a stronger approach towards brand
recognition, as well as customer retention. In the past 12 months,
Remedy has also seen 15% of its revenue come from emails.
Remedy intend to create a wider focus on its customers by
enhancing re-engagement programs and different types of
automated triggered emails – including transactional emails.
The re-engagement campaign will help the brand approach its
existing customers with relevant content in a dynamic fashion.
Annual Report 2019/2020
11
STRATEGIC REPORT
Chief Executive Officer’s report and financial review
Key Highlights
Group Revenue (Continued & Discontinued)
Revenue (Continued)
Adjusted operating profit (Continued)*
Adjusted EBITDA (Continued)**
Net Assets
Cash
30.6.20
(£m)
54.9
47.4
13.1
18.2
50.7
25.4
30.6.19
(£m)
51.3
%
Increase
7%
42.5
11.8
14.7
41.5
19.3
12%
11%
24%
22%
31%
* adjusted operating profit excludes share based payment, exceptional costs and amortisation
of intangibles on acquisition
** adjusted EBITDA excludes share based payment, exceptional costs and amortisation
of intangibles on acquisition
Milan Patel
Chief Executive Officer
Overview
The Group delivered organic revenue
growth from continuing operations of 12%
to £47.4m (2019: £42.5m) and adjusted
EBITDA growth of 24% to £18.2m. Recurring
revenues represented 91% of overall Group
revenues (2019: c.89%), of which c.90% is
contracted, giving good visibility. Recurring
revenues derived from enhanced product
functionality grew by 16% to £14.4m (2019:
£12.4m), an important indicator of the value
created by our focused R&D programme.
The Group is cash generative and maintains
a strong balance sheet with no debt and
net cash balances of £25.4m at year end
(2019: £19.3m), giving the Group scope to
continue to invest in order to drive long-term,
sustainable growth.
During the year, the platform’s average
revenue per customer (ARPC) continued
its upward trend, growing by 12% from
approximately £966 per month to £1,083
per month. This was largely the result of
increased spend, both from additional
messaging and additional functionality
being used to drive a more personalised
experience, along with signing up larger
customers. Overall, the volume of messages
sent out by the platform increased by 28%
to 21.1bn from 16.5bn in 2019, reflecting
both an increase in existing customer
message volume growth and message
volume growth from the new customers
that we added during the year.
Impact of Covid-19
As a business, we transitioned quickly and
smoothly to working from home. There
was minimal operational impact, with all
our teams, from engineers and customer
support to sales and marketing, continuing
to function at full capacity.
As previously reported, in the early stages
of the pandemic we saw a slowdown of
new business wins as decision making
took longer for prospects. This mainly
had an impact on sales in April, but at the
same time we saw a reduction in churn,
and trading improved on a monthly basis
through to the end of the financial year.
Our platform is sector and geography
agnostic, and we saw the benefits of the
diversity of our customer base throughout
the pandemic, faring better than some
of our peers with more concentrated end
markets. The strong contracted recurring
nature of our business model and our
disciplined approach meant that cash
collection remained robust throughout
the year.
We retained all our colleagues during
the pandemic, and none were furloughed,
reflecting the continued high levels of
demand for our platform and the confidence
we have in the financial strength of
the business.
Market
There is no doubt pandemic-related
lockdowns and travel restrictions have
accelerated the general trend towards
digitalisation. Reporting strong top line
growth in its Q3 results at the end of April
on the back of accelerated adoption of its
Teams communication and collaboration
platform, Microsoft CEO Satya Nadella said
the pandemic had driven “two years’ worth
of digital transformation in two months”.
Perhaps not to the same extreme, a similar
sentiment can be applied to the pandemic’s
impact on the marketing industry. Digital
has been growing as a proportion of overall
marketing budgets for some time, but
the pandemic has meant that to continue
cultivating leads and maintaining effective
communication with customers, marketing
teams – many of which had previously
relied on face-to-face interactions – have
had no choice but to make greater use of
digital channels, with email taking on an
increasingly significant role.
12
dotdigital Group Plc
“As the Covid-19 crisis was unfolding we understood the
importance of a strong ecommerce presence and acted
accordingly. Thanks to dotdigital automated programs, we
were able to surface customer data and use that intelligence
to create personalised customer experiences.”
Carl Hartmann | Co-Founder of Lyre’s
According to a recent survey of Fortune
1000 marketers by Chief Marketer, a leading
content portal for marketers, email is now
second only to social media as the most
likely source of B2C conversion post-Covid,
having taken significant share from in-
person sales and live events. Respondents
also reported a dramatic increase in the
effectiveness of email as a source of B2C
engagement. This is consistent with what
we have been seeing, with healthy levels of
new business acquisition from May onwards
and more frequent and extensive use of
email by existing customers.
We have also seen an increase in uptake
of our omni-channel offering during the
pandemic, with 23% of customers now
using more than one channel. Organisations
are keen to increase the number of touch
points with customers and prospects
against a backdrop of heightened economic
uncertainty and reduced consumer
spending. SMS revenues have increased
significantly, and we have seen an increase
in the number of customers making use of
our real-time messaging capabilities such
as in-browser live chat. We have also seen
a trend towards an increase in the use of
data-driven digital marketing, as marketing
strategies become mature and customer-
centric in ensuring they have a relevant
and targeted message at every touchpoint
between the customer or prospect and
the brand.
Marketers will continue to shift and
adapt their strategies as the recovery from
Covid-19 continues, but now more than ever
organisations recognise the power of email
and other digital marketing channels, and
these are likely to remain vital components
of marketing strategies around the world
as we emerge from the crisis. dotdigital
understands the evolving needs of its
customers and is committed to continuing
to develop and enhancing its platform to
help them be successful.
Geographic progress
All regions grew during the period, with
the success of our international expansion
strategy evident in that revenue from outside
the UK was 31% of Group revenue for the
year, up from 29% in FY19. We expect this
to trend to continue as we deploy more
investment in international regions.
International expansion is a key tenet of our
growth strategy and has been a significant
area of investment in the period. We have
continued to strengthen our presence
and enhance our prospects across all
territories, despite the challenges posed
by the pandemic, and expect to see that
flow through to an improved top line growth
rate in our overseas businesses as we move
into FY 20/21 and beyond.
Growth strategy
dotdigital’s organic growth strategy
continues to be focused around its three
core pillars:
Geographic
progress
?
Product
innovation
Developing
strategic
partnerships
Annual Report 2019/2020
13
STRATEGIC REPORT
Chief Executive Officer’s report and financial review continued
“Our account manager has been an absolute champion. It
would be an understatement to say that she has just helped us
build our programs, because she’s not only done that, but made
us rethink and rebuild our email strategy as a whole.”
Damien Finecott | Brand & Project Development Manager at Goggles4u
Product innovation
Functionality recurring revenues in the
period grew 16% to £14.4m (2019: £12.4m),
illustrating continued growth in the uptake
of enhanced features, increased use
of data and demonstrating our ability
to successfully drive more value from
our platform.
R&D investment in the year was £6.5m
(2019: £5.5m), consistent with management
expectations. Despite the disruption caused
by the pandemic in the second half, we
continued to execute against our product
strategy and our roadmap has continued
to develop as anticipated.
Our areas of focus for continued product
innovation remain as follows:
• Data and intelligence – joining all
data together to create a single
customer view and help our customers
better target their campaigns from a
personalisation perspective. We have
dedicated a great deal of resource
to this in response to increasingly
sophisticated customer requirements
and will continue to do so through
FY 20/21, culminating in significant
upgrades to the platform.
• Marketing automation – harnessing
artificial intelligence and machine
learning across targeted parts of
the platform’s architecture. This
included the launch of sector-tailored
product packages for commerce
customers and enhanced product
recommendations capabilities.
• Building out further omni-channel
functionality – to assist businesses
through the full customer journey at
every touch point. This included the
launch of a new live chat solution
through the Engagement Cloud and
additional SMS capabilities, with an
increase in take-up of both in the period.
A further area of focus in the period has
been our reporting and analytics capability.
The level of recency, frequency, and
monetary insight we can provide has
been enhanced, allowing customers
to better target individuals through the
engagement curve.
Other key developments in the period
include improving the end user interface,
bolstering our transactional email and
messaging capability for all of our
integrations, and introducing concepts
of loyalty into the platform.
Developing strategic partnerships
We have continued to invest in all our
strategic partner relationships, which are
important in raising brand awareness in the
regions and verticals in which we integrate,
and are pleased with the progress we have
made in developing them and refining our
joint go-to-market strategies. Sales through
connectors into strategic partners increased
10% to £22.2m (2019: £20.3m).
At the same time, from a technical
perspective, we have made marked progress
in optimising our integrations through
both improving our connectors, software
architecture that models interactions with
our strategic partners’ respective platforms,
and the rules that govern those interactions.
The combination of these continues to
improve conversion rates.
Enhanced brand awareness alongside
the additional functionality we developed
for e-commerce merchants drove further
growth in the Magento space. Sign-up of
customers through Magento in all regions
remained strong – in the period we added
206 Magento customers to the platform,
taking the total to 716 as at the end of
June 2020. Revenue from Magento
customers in the period grew 10% from
£11.8m to £13.0m.
EMEA
EMEA revenue grew 9% to £36.3m despite
market uncertainties in the second half of
the financial year. Sales cycles lengthened
during the initial lockdown as prospects
delayed technology decisions and existing
customers delayed project completions.
As lockdowns started to ease, we saw an
uptick in momentum both from a pipeline
and sales conversion perspective.
North America
Revenues from North America were up
17% to US$10.5m from US$9.0m in 2019.
North America is a key growth market
and we have invested heavily in the region,
including the appointment of an experienced
General Manager to lead an already strong
team, create more management bandwidth
and bring greater experience of growing
companies in this region.
Our focus remains on growing relationships
with partners to help us build our presence
while increasing brand awareness. We
made a great deal of progress on both
fronts in the period – particularly with
Dynamics, Microsoft’s line of enterprise
resource planning and customer relationship
management software applications.
In May, we hired a partner manager who
has experience in the space to enhance
our relationship. They have already made
significant progress, giving us confidence
of increased traction in the space moving
forwards.
In the current financial year, we intend to
hire more sales and marketing resource in
the region to accelerate our expansion plans
and help us achieve our scale ambitions.
APAC
APAC saw the highest levels of growth in
the year, albeit from a smaller base, with
revenues growing 37%, from AUS$3.8m in
2019 to AUS$5.2m. We continued to invest
in our Singapore team in the period and
expect to see numbers of customer sign-
ups through partners and direct sales
continue to increase as we build out our
presence there.
14
dotdigital Group Plc
Global office network
UK
London, Cheltenham,
East Croydon and
Manchester
North Americas
New York
Europe
Netherlands, Minsk
and Warsaw
Asia
Singapore
Australia
Sydney
Africa
Cape Town
Australia
Melbourne
Annual Report 2019/2020
15
STRATEGIC REPORT
Chief Executive Officer’s report and financial review continued
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
Globalising
our talent:
organisational
strength and
capabilities
Grow our
customer base:
increasing our
global market
presence
Organic
growth
Deepening
our strategic
partnerships:
building new
connectors
Growth by
acquisition
Expand
geographical
coverage
Adjacent
relevant
technology
Deeper
functionality
with our
core USP
16
dotdigital Group Plc
“Another benefit of using dotdigital is its flawless on-boarding
process, accompanied by their user-friendly platform”.
Tom Melenhorst | Digital Marketing & Ecommerce Manager at Remedy
All new Magento users continue to ship
as standard with dotdigital messaging
capabilities and now also get our chat
functionality pre-installed, providing
marketeers an increased value proposition
for their digital marketing strategies.
The new functionality allows us to capture
the online conversations for segmenting
upon, for relevancy and better machine
learning for product recommendations
and marketing automation. The introduction
of chat functionality allows us to add an
additional source of lead generation from
the Magento community. Our respective
teams continue to work together on our
joint marketing strategy and enhanced
development of our integration.
At the end of the financial year, we had
83 customers using the Shopify connector
versus 56 at the corresponding time last
year. In the year, revenue from Shopify
customers grew 36% from £0.9m to £1.2m.
With the inclusion of the dotdigital platform
in Shopify’s Plus Certified App Program,
which is intended to make it easier for
Shopify Plus merchants to discover carefully
selected, best-of-breed apps, and our
relationship continues to go from strength
to strength. In addition, we have seen
an increasing pipeline resulting from the
integration that we have built with Shopify
Flow, which allows e-commerce merchants
a seamless connection to easily deploy
campaigns from the dotdigital platform.
We continue to build relationships with
system integrators in the partner ecosystem
to drive demand for the platform.
As Big Commerce’s global elite partner,
we continue to deepen our strategic
relationship, formulating a joint go-to
market plan through offers for e-commerce
merchants, and joint marketing efforts to
the user base. This will enable us to increase
our addressable market across all regions,
and we are already starting to see more
customers using the integration as a result.
As previously mentioned, in May we hired
a North American partner manager to build
our strategic relationship with Microsoft
for the integration of our platform into
Dynamics 365, where we see a significant
opportunity. Revenues from customers
using our Dynamics connector were broadly
flat at £3.8m in the period. We expect to see
this grow in the current financial year as we
begin to build on the strong foundations we
have laid and take market share.
Financial Review
Revenue
The Group achieved continuing operations
revenue growth of 12% (2019: 15%), which
delivered record overall revenues of £47.4m,
despite the impact of the pandemic in the
fourth quarter of our financial year. The
quality of the revenue growth is evidenced
by increased recurring revenues of 91%.
The Group continued to grow internationally
with revenues accounting for 31% of the
total (2019: 29%).
Business model
The Group generates the majority of its
revenues from annual message plans
which are recognised equally over the life
of the contract. In addition, we sell upgrade
packages to customers allowing them to
use additional modules and features of our
platform. For more sophisticated customers
we offer customised functionality and
integrations so that they can maximise
the use of their customer data. These
professional services contracts are
recognised as revenue as the work is
performed. Over the past year we have
built other messaging channels into our
core platform, including SMS and Live
Chat, and access to these channels are
sold separately.
Gross margin
The gross margin for the period for
continuing operations was 87% (2019: 90%).
The decline in gross margin comes from the
growth of non-email messaging channels,
and in particular SMS. We continue to see
value in both the direct and indirect models
of selling in our international regions, and
hence continue to invest in building long-
term annuity revenues.
Operating expenses
Adjusted operating profit from continuing
operations grew by 11% from £11.8m
to £13.1m. Operating expenses as a
percentage of revenues dropped from
62% to 59%, reflecting the growth in revenue.
dotdigital continues to invest in people in
the areas of development, sales and
marketing, particularly within the regional
offices, to continue enhancing and adding
to the product suite.
Balance sheet
There was strong cash management in
the year with net cash generated from
continuing operations of £18.2m (2019:
£13.3m). The cash balance at the end of
the period was £25.4m (2019: £19.3m).
The Group continues to be debt free and
maintains a healthy balance sheet. A
combination of a highly efficient cash
collection process and an incentivisation
push to move more customers onto Direct
Debit and automated credit card collection
helped with the year-end position.
Trade receivables have only grown by 8% in
the year, reflecting revenue growth and good
cash management. Overall receivables have
grown 6% due to the deferment of marketing
expenditure such as tradeshows and
conferences which have been postponed
due to Covid-19 and deferred commission.
Annual Report 2019/2020
17
STRATEGIC REPORT
Chief Executive Officer’s report and financial review continued
“Perhaps the most important aspect of working with
dotdigital is that they have taken the time to understand
our business and objectives.”
Ashley Read | Managing Director at Science in Sport
The Group continues to invest heavily
in the platform to increase functionality
around marketing automation, increasing
the number of messaging channels and
surfacing data and providing insights for
our customers to provide excellent customer
engagement. This continued investment is
demonstrated by the increase in product
development to £6.5m from £5.5m in 2019.
Goodwill
£9.1m of goodwill reflects the acquisition of
Comapi in 2017/18, for a cash consideration
of £10.7m. Identifiable intangible assets
included £1.2m of technology and £1.2m
of customer relationships. The former has
been fully amortised in the year. As the
Comapi CPaaS technology was successfully
fully integrated into the Engagement Cloud
platform, this has now become part of
the dotdigital offering, leading to goodwill
reflecting the technology and know-how
of the Engagement Cloud platform, as
opposed to the discontinued operational
part of Comapi.
Tax
Profitability from continuing operations
continues to grow. This is reflected within
the tax charge, which is now £0.8m with an
effective tax rate of 6%, with a lower than
standard rate due to enhanced R&D tax
credits.
EPS
In the year the continued operations
adjusted basic EPS was 3.84p (2019: 3.93p)
and adjusted diluted EPS was 3.79p (2019:
3.88p). Despite a higher level of pre-tax
profit, the decrease in adjusted EPS is driven
by an increased tax rate of 6% (2019: 1%).
Dividend policy
As announced last year, the Board
conducted its review of its organic business
plan for the following three years. This
included evaluating the cash needs required
for opportunities in organic growth to
increase shareholder value and capital
expenditure. The Board decided that it will
continue to keep a progressive dividend in
line with EBITDA growth. Therefore, subject
to approval at the AGM in December 2020,
the Board proposes that the Group will pay
a final dividend of 0.83 pence per ordinary
share (2019: 0.67p); to be payable at the
end of January 2021.
Current trading and outlook
As reported in the trading update published
in October, the new financial year has
started well with a strong first quarter sales
performance driven by existing customer
growth, new customer wins and significant
take up of non-email channels.
This strong performance has continued
into October and the Board now expects
to deliver a greater rate of revenue growth
this financial year versus current consensus
expectations. The strong performance has
been driven by continued take up of non-
email channels, predominantly SMS, which
is a lower margin product than email.
The incremental margin will be reinvested
in the business to drive future growth, in
line with the previously stated strategy
and the Board is confident on achieving
consensus earnings and cash for the full
year to 30 June 2021.
It is critical we remain alert to external
factors and continue to monitor the
international Covid-19 response closely,
but with encouraging momentum in the
business, good revenue visibility and
continued strong cash generation, we find
ourselves in a position of relative strength.
Confident FY21 will be another year of
substantial growth and good progress
against our strategy.
Our balance sheet is in good shape and we
intend to continue to invest in our platform
to cement our market-leading position and
ensure we continue to grow sustainably and
profitably for many years to come.
I would like to take this opportunity to
again thank all our colleagues around the
world for the way they have responded to
the events of the past few months. They
have demonstrated exceptional levels of
commitment and have worked tirelessly
under unprecedented circumstances to
ensure we continue to deliver a first-class
service to our customers and move forward
as a business.
Milan Patel
Chief Executive Officer
17 November 2020
Paraag Amin
Chief Financial Officer
17 November 2020
18
dotdigital Group Plc
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.
Annual Report 2019/2020
19
STRATEGIC REPORT
STRATEGIC REPORT
Case study
Case study
Science in Sport uses email to increase
AOV and sales revenue
Science in Sport (SiS) pushes the boundaries
of science and nutrition to empower athletic
performance. Working with elite global athletes,
SiS has become the world’s number one endurance
nutrition brand, selling everything from energy
and hydration products to protein supplements
and vitamins.
Challenge
Under new leadership, the brand recognised the potential to widen
the market to cover every athlete: from Olympian to hobby cyclist.
The new owners began to diversify into high-street retailers and
major supermarkets. The website was also poised to become the
number one sales channel, so the owners set out to build a digital
presence that would integrate with their retail activities.
However, SiS operated an infrastructure that included website,
email, social media, CRM, and sales systems – all of which were
disconnected. These legacy platforms didn’t support the ambition
of an integrated digital presence across all channels.
33%
of online sales revenue
was attributed to email
in the first eight months
after implementing
Engagement Cloud.
20
dotdigital Group Plc
Solution
SiS started profiling market data, identifying its customers
(between the ages of 18 and 44) as online-savvy, time-poor,
and moderately wealthy. Once the analysis came in, the brand
found that rather than being predominately cyclists, which the
family owners had targeted almost exclusively, the customer
base covered every kind of endurance sport.
“We recognised that market
opportunity ranged from elite athletes
to serious amateurs.”
Engagement Cloud for Salesforce
One of the first activities dotdigital carried out when SiS
came on board was to integrate Engagement Cloud with
Salesforce CRM. This opened up the ability to segment
not only on interests and purchase history, but also email
activity and website behavior.
Moreover, Google Analytics provided rich data on content
performance. This valuable insight helped build a case for
more editorial material to complement promotional emails.
SiS would communicate the core science behind the brand
to educate people on how using effective sports nutrition
can help athletes perform better.
Results
This shift in messaging is reflected in other digital activities
and is delivering a strong year-on-year sales growth of 23%
– 15% above the industry average. Better targeting brought
more revenue: 33% of online sales revenue was attributed
to email in the first eight months after implementing
Engagement Cloud. That’s an increase of nearly 15%.
What’s more, SiS experienced an uplift in average order
value from £26 to £38 – a growth of 46%.
“Perhaps the most important aspect
of working with dotdigital is that they
have taken the time to understand our
business and objectives.”
Ashley Read | Managing Director
Annual Report 2019/2020
21
STRATEGIC REPORT
Risks, impact and mitigations
Our risk management framework enables
a consistent approach to the identification,
management and oversight of risks. This
consistency is valuable as it allows us to
take a holistic approach to risk management
and to make meaningful comparisons of
the risks we face and how we manage
them across the globe, which is essential
to achieve our strategic objectives.
Using our risk management framework,
the Group identifies the risks that could
affect the strategy and operations in
order to implement risk mitigation plans.
Departments within the organisation identify
the risks that could affect their strategic and
operational plans. The consolidated risks
are consolidated under a single Group wide
risk register. These risks are scored based
on impact and likelihood and reviewed on
a regular basis. Principal risks scored over
a threshold are highlighted and reviewed
by the Group’s Risk Committee. Members
of the Risk Committee are assigned to
principal risks and these become executive
owners responsible for confirming adequate
controls are in place and the necessary
action plans are implemented. The
Chairman of the Risk Committee reports
on the principal risks to the CFO who in
turn reports to the Board.
Key improvements
• Aligned all risks under a single risk
management framework and tools
aligned to ISO best practice standards,
enabling tracking of risks across all risk
management meetings;
•
Increased cadence of Risk Committee
meetings to six per annum;
• Continued to develop the link between
risk and budgeting to inform the capital
deployment in a timely manner;
•
Implemented a process for tracking risk
treatment plans to manage our principal
risks; and
• Further enhanced our risk processes
reflecting lessons learned from the
Covid-19 pandemic to be better prepared
in the future.
Strategic
Financial
Technological
Operational
The influence of stakeholders
and industry on our business
Our financial status, standing
and continued growth
The platform, technology and
systems that support our
business and the data they hold
The ability to achieve our
optimal business model
Risk area
Impact
Mitigation of risk
Global economic
disruption
Financial
Movement:
Increased
Geography specific
market and political
environments
Financial
Movement:
Increased
Disruption caused by global external
events, such as pandemics (e.g.
Covid-19), that impacts our financial
performance.
• Continued building of recurring contracted revenue stream
• Sufficient liquidity resources so that we can cope for prolonged
period of time without accessing the capital markets
•
Increasing flexibility for customers around payment terms
• Quickly executable scenario plans reviewed to prepare for varying
levels of financial impact to reserves
• Continued investment into Business Continuity planning to enable
staff availability, building accessibility and for hardware failure
Reliance on revenues and resources
relating to a single region increases the
risk to our financial performance if that
region were to experience an economic
decline or political unrest.
• Continual increase in international revenues outside of the UK
• Successful exploration into options relating to geographic
expansion above and beyond the UK, US and Australia –
specifically Singapore and Netherlands
• Constant review by the executive team for growth opportunities
in additional territories
• Monitoring of the market conditions and political environment in
regions we have offices, staff, target prospects and customers
• Continue to distribute critical staff and engineering teams across
regions for resilience
22
dotdigital Group Plc
Risk area
Impact
Mitigation of risk
Optimising and
growing high-
performance teams
Failure to attract, hire, develop, support
and retain high-performing individuals will
reduce the ability to achieve our goals.
• Delivery of a comprehensive programme of formal and informal
learning and development opportunities aligned to the needs and
goals of the business
Operational
Movement:
Increased
Brexit
Operational
Movement:
Stable
Data privacy
Operational
Movement:
Stable
•
Investment into flexible working arrangements, home office
environments and wellbeing programmes to support our staff
through global events, such as pandemics
• Continued commitment to organisational structures, internal
communication tools and processes to enable cross-team
collaboration
• Regular evaluation of staff benefits to ensure market
competitiveness
• Supporting our staff through our dotcommunity programme,
creating a listening culture, one of openness where staff
can discuss all types of issues whether, social, political and
environmental
• Expansion into new territories increases accessible talent
pools we can hire in
• Review of our supplier and customer contracts to ensure
appropriate safeguards are in place to protect the flow of data
from the EU to the UK and entering into Model Contract Clauses
as appropriate
• Research and monitoring of legislative environment, particularly in
relation to data transfers between the UK and EU and vice-versa
• Monitoring whether those countries deemed adequate by the
EU have maintained unrestricted personal data flows and
adequacy decision with the UK
•
Internal HR team reviewing strategies for dealing with EU staff,
depending on post-Brexit negotiation outcomes
• Monitoring the potential impact based on amendments that
could be made to indirect taxes regime within the UK and between
other EU countries
• 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. We actively contribute 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 and California Consumer Privacy Act (CCPA)
• Ongoing monitoring of the regulatory environment, including any
guidance from supervisory authorities or compliance actions made
under GDPR and the CCPA and developments to the proposed
e-Privacy Regulation
Annual Report 2019/2020
23
We have a large business footprint within
the United Kingdom; both in terms of
staff headcount, and in terms of the
customer base. Brexit still has a number
of unknowns (mainly whether the UK will
reach a trade deal with the EU as to the
nature of their post-Brexit relationship)
and these present some amount of risk.
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 the EU, may place additional
regulatory burdens on us which make it
harder to operate with EU-based companies.
Certain laws and regulations such as
the General Data Protection Regulation
(“GDPR”) require or may require us and
our 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.
STRATEGIC REPORT
Risks, impact and mitigations continued
Risk area
Impact
Mitigation of risk
• Promote our services as digital first alternative to traditional
marketing strategies
• Monitor key environmental impacts and aspects that come from
our operations
• Benchmark key environmental data, reporting regularly on
current performance
• Set internal objectives around improvement
• Partner with organisations to support quality initiatives to
offset our primary impacts and aspects demonstrating
our commitment to sustainability
• Be transparent to customers through a public-facing Trust Centre
communicating what we do and the impact to the environment
•
Implement controls and processes with our vendors to provide
more sustainable services
• Foster an internal culture of improvement and sustainability
• Align with internationally recognised standards like ISO 14001
• Remaining a credible provider of customer engagement SaaS
solutions through constant investment in development and
monetisation of new solutions, partnerships and enhancements
• A product development strategy that facilitates the implementation
of rapidly changing technologies, new enhancements and
maintaining the existing products to a high standard
• Dedication to continuing to remain relevant in maturing B2B and
B2C verticals, reducing risk through the relevancy of the platform
to the challenges these customer face
• Continued focus on combining email marketing and automation
capabilities with the market-driven need for supporting more
conversational channels and leveraging data, machine learning and
orchestration to drive decisions
• Continued evaluation and optimisation of product performance in
the technology landscape to reduce maintenance overheads
• A constant focus on enabling customer growth through the ease
and flexibility of our best-of-breed integrations
• Reinvestment in new product features, best-in-class 24/7
customer support and service offerings, enhanced brand
recognition and improved service delivery
• A global marketing presence and PR strategy to attract
new customers
• Further improvement of the products’ renowned user experience,
including hiring dedicated user experience professionals
• Continued focus on increasing content, delivery and
personalisation capabilities across established and emerging
messaging channels
• An enhanced focus of investment on our data, AI, reporting and
machine learning capabilities and applying these to surprise and
delight existing and prospective customers
• Continuing to listen to our customers and the market to solve
real customer problems in an intuitive way
Environmental
Operational
Movement:
Increased
As awareness on the climate challenge
increases, it is expected there will be
increasing legislation and customer
pressure to provide sustainable business
operations.
Evolving technology
and customer
requirements
Operational
Movement:
Stable
Failure to anticipate or respond to
evolving messaging channels and
customer requirements or to introduce
competitive enhancements or maintain
existing products may impact growth and
customer retention. The introduction of
new solutions by competitors potentially
makes our solutions less competitive.
Competitive
environment
Strategic
Movement:
Stable
The sector we operate in is competitive.
The impact of competitors having more
features, increased financial backing,
better brand recognition and better
global coverage increases the risk to
our business.
We focus on customers operating across
different verticals – e.g. retail, commerce,
B2B, education and not for profit – by
definition make for a large competitive
landscape.
24
dotdigital Group Plc
Risk area
Impact
Mitigation of risk
Internet service
providers (ISPs),
reputation and
internet browser-
related risks
Strategic
Movement:
Stable
As a large proportion of our 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.
Key platform
integrations
Strategic
Movement:
Stable
Loss of a strategic
partnership
Strategic
Movement:
Stable
We are increasingly investing in
integration with third-party platforms to
provide an enhanced product feature
set – for example WhatsApp, Facebook,
Twitter and Google. These platforms
all have various contractual bases for
access and we maintain our obligations
carefully. However, any future change in
the terms granting access may impact our
continued ability to integrate our product
with these platforms.
Revenues could be impacted if a strategic
technology partner was acquired, changed
contractual terms, had lost market share
or their customers en masse. On such an
event, customers may re-platform to a
technology partner who we do not have
a integration with.
If a strategic technology partner
significantly changed partner terms,
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.
• 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) and the Email
Sender and Provider Coalition (ESPC)
• Continued investment into technology that can proactively block
trial account sign-ups and automated bots
• Development of a risk-based vetting approach of prospective
customers and their data acquisition practices
• Continued investment in a deliverability, anti-abuse and compliance
team, under the leadership of the deliverability and compliance
functions. With swift handling of abuse complaints generated
by customer messaging, including where necessary account
suspension and agreement termination
• Explore and implement alternative message routes for upstream
providers for channels that this is supported e.g. SMS
• Maintain strong relationships with these platforms
• Ensuring our platform policies align with the third parties
• Continuous review of competing functionality from other vendors
• Continued investment into the capabilities of each key integration,
to ensure continued relevancy for customers and compliance with
any third-party or statutory changes
• Continued investment to strengthen relationships with our
key strategic technology partners
• Contractual arrangements in place and service level agreements
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
• 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 to
enable data synchronisation functionality to hundreds of platforms
at one time
Annual Report 2019/2020
25
STRATEGIC REPORT
Risks, impact and mitigations continued
Risk area
Impact
Mitigation of risk
Use of public cloud
service
suppliers
Technological
Movement:
Decreased
We utilise public cloud suppliers to
host our 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 our
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.
Supplier and
computer hardware
related risks
Technological
Movement:
Stable
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.
We rely 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 our profitability.
Information security
and cyber risks
Technological
Movement:
Stable
The ever-evolving, sophisticated nature
of the cyber threat landscape poses an
ongoing risk. Revenue depends on the
protection of the confidentiality, integrity,
and availability of data and computer
systems; and a trust in our brand
reputation.
A successful cyber attack against our
digital assets could significantly impact
the its ability to function, as well as its
ability to retain and attract business.
•
Informed choice of best-of-breed cloud computing suppliers (we
have selected Microsoft Azure, CloudFlare, Amazon AWS, and
Google Cloud Platform), the architecture and contracts of which
facilitates high uptime SLAs and a quick recovery in the event of
a single region failure
• 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
• Continued investment into reducing platform Recovery Time
Objectives (RTO), either by optimising processes, using enhanced
technology or adding database replicas in secondary public
cloud regions
• Regular simulation of Disaster Recovery plans to recover
computing resources in a secondary region
• Build strong relationships with cloud suppliers at an executive level
• Due diligence of cloud computing supplier security and incident
handling processes, penetration testing results, change
management and security and privacy accreditations
• 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
• Research and migration to technologies and public cloud services
that can host the message send components reducing the impact
of a loss of a data centre
• Tracking of message metrics regular reviewed and monitored
by the executive team
• Continual evaluation of suppliers and technologies with the
prioritisation of send volume, scalability and resiliency, and
business continuity
• Continual investment in and maintenance of our currently owned
IP addresses to ensure global reputability and use optimisation
• Frequently reviewing the most profitable upstream supplier routing
options, and negotiating contracts regularly based on current and
anticipated volume
•
Implementation of an externally audited ISO 27001 certified
Information Security Management System (ISMS) and pursuit
of further ISO best practice standards
• Continual investment in a defined information security programme
and technology, 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, Web
Application Firewalls, Rate Limiting 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
26
dotdigital Group Plc
Corporate social responsibility report
This year we, like many other companies, have been
dramatically affected by the Covid-19 pandemic. Our
rapid response during this trying time has seen us place
a newfound focus on the health and wellbeing of our
employees, clients and communities.
Supporting our clients
Customer success continues to be a central
pillar for dotdigital’s customer strategy.
This year we have sustained constant
investment in our client facing teams as
well as promoting a client-first culture
across the organisation.
This culture was evident as we supported
clients around the world to transition during
phases of lockdown. To help customers
mitigate the potential economic impact
of the pandemic, we offered customers
enhanced access to the dotdigital platform.
This included access to our recently
launched Chat feature and an additional
email marketing account to connect with
internal stakeholders, free of charge.
We have also maintained and strengthened
our free learning events for clients. Our
highly successful educational seminars,
dotlives, have smoothly evolved into
webinars with further reach than ever
before. We now run separate events for
clients in the Americas region to ensure
all clients have access to our unparalleled
learning resources.
Supporting our communities
As well as supporting employees and
customers through this difficult year,
dotdigital understands the role we play
in the communities in which we operate.
We are committed to doing our utmost to
support a wide diverse range of causes,
movements, charities, and organisations.
This year we have continued to support our
named charities Macmillan Cancer Support,
Save the Children and Alternatives. We have
also built on the momentum of our women at
work ‘In common’ events with mental health
and environment-themed talks. As we shifted
to working from home, dotdigital decided
to redistribute funds from our monthly
dotlunches for staff to be donated to local
hospitals and nurses fighting the virus.
Recognising the importance of our role as
an ally to the Black Lives Matter movement,
we decided to take an open and honest
stance on this issue. Staff were given a
learning day to commemorate Juneteenth in
order to educate themselves on the history
and actions behind the movement. As an
organisation we have pledged our ongoing
support to black communities everywhere.
As well as comprehensively supporting
staff and clients as they adapted to new
circumstances, we have continued to
support learning and development across
the board.
Supporting our employees
Our response to the Covid-19 pandemic
prioritised the safety and wellbeing of our
people, right from the very beginning. The
business took swift action as various levels
of lockdown swept across the countries in
which we operate. Clear decision making
and a well-coordinated business continuity
plan ensured that we maintained business
as usual for our clients and partners as we
helped staff adapt to new ways of working.
The move to working from home for
staff across our 12 global offices was an
exceptional organisational effort, but, due
to quick actions and clear communication,
it has received overwhelming support.
Throughout this time, the development,
retention, and recruitment of top-class
talent remained a key goal for dotdigital.
The internal recruitment market for our
employees remains strong, with over
20% of positions being filled by internal
applicants. This continues to be an
important factor of our employee
development and is supported by the
increased availability of positions open
to our employees wherever possible.
Annual Report 2019/2020
27
STRATEGY REPORT
Corporate social responsibility report continued
“We are delighted that dotdigital have joined as a Corporate Member of the
Woodland Trust and are grateful for their funding of £5,000 which will help
us address both the nature and climate crisis by protecting woods and trees UK-
wide. dotdigital have been a supplier of the Trust for five years so it’s especially
heartwarming to see that our relationship will continue to grow in different ways
to support delivery of our cause.”
Darren Moorcroft | CEO, Woodland Trust
28
dotdigital Group Plc
First environmental policy
The last year saw us launch our first ever
environmental policy. In this policy, we have
committed to adopting environmental best
practices in alignment with ISO 14001 and
implemented an Integrated Management
System (IMS).
To align ourselves to the international
standards set out in ISO 14001 we rolled
out a global training program to educate
internal stakeholders about sustainability.
In light of the new working practices
employees have adopted due to the
Covid-19 pandemic, we adapted our training
to include pointers about how to work from
home in an environmentally friendly way.
Carbon emissions
Last year we have made our offices, business
travel, cloud services, and data centres
carbon neutral. This represents the vast
majority of our global emissions. Working
within the framework of ISO 14001 and
following the Oxford Offsetting Principles,
we have developed a carbon offset and
mitigation strategy in order to combat the
climate crisis and ecological emergency.
As part of this initiative, we are offsetting
all of our Scope 1 and Scope 2 emissions
and going further to include specific Scope
3 emissions. We are proud to be supporting
international initiatives that help reduce our
carbon emissions. These include:
Optimising energy consumption
1.
Renewable energy
Over the last year we made significant
headway in our goal to become a platform
powered 100% by renewable energy. We have
switched to vendors and service providers
who have strong green credentials.
Microsoft Azure, which supplies the
dotdigital service, uses 100% renewable
energy and is carbon neutral with goals to
become carbon negative by 2030. Google
Cloud Platform, which plays a similar role
at dotdigital, is also carbon neutral and
100% renewable.
We are excited to now be a 100% renewable
energy platform in Europe. We aim to
achieve this high standard in all regions
by June 2021.
2.
3.
Gyapa efficient cook stoves – These
efficient cooking stoves reduce the
use of coal and wood by 50%. This
lowers rates of deforestation, reduces
instances of respiratory disease caused
by toxic smoke, and has prevented
3 million tons of CO2 to date.
Burn efficient cook stoves – Based
in East Africa, this project has similar
benefits to Gyapa, along with the
employment of over 200 local people
(half of whom are women), who
support the manufacturing, sales,
and distribution of these stoves.
Aqua Clara water purification – This
project helps communities gain access
to safe drinking water by making
affordable household purifiers. In doing
so, it also reduces the need to boil
water which effectively lowers rates
of deforestation in surrounding areas.
Green initiatives
Over the past year we have launched a range
of activities designed to engage internal and
external stakeholders with our commitment
to improving our environmental impact.
Project dotgreen encapsulates the business’s
efforts to minimise our negative impact
on the environment and promote positive
environmental behaviours. We engaged
with our wider community through Project
dotgreen’s involvement in the ‘In common’
webinar series, posting on the external blog
for World Environment Day and posting
updates on the website’s Trust Center.
Internally, we have assembled a team
of ‘Environmental Champions’ to promote
green behaviours in all UK and other global
offices. Project dotgreen has introduced
referral codes to encourage staff to choose
green energy suppliers for their homes.
We have extended our staff wellbeing
rewards to be used for greener living,
such as gardening and fruit and vegetable
growing. This is all in addition to our long-
standing travel loans to encourage use
of public transport to commute and Cycle
to Work scheme.
Strategic report
The strategic report was approved by a
duly authorised committee of the Board of
Directors on 17 November 2020 and signed
on its behalf by:
Additionally, we extended our carbon
mitigation by becoming a corporate member
of and donating to our longstanding
customer the Woodland Trust.
Milan Patel
Chief Executive Officer
Annual Report 2019/2020
29
GOVERNANCE
Board of Directors
Milan Patel FCCA ACSI
Chief Executive Officer
Paraag Amin CFA
Chief Financial Officer
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, totalling 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 joined the Group 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 (now Aquis – AQSE) and the introduction to AIM.
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
permanent 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 acquisitions 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.
30
dotdigital Group Plc
Michael (Mike) O’Leary
Non-Executive Chairman
Boris Huard
Non-Executive Director
Elizabeth (Liz) Richards ACA
Non-Executive Director
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
previously held 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.
Mike joined the Board of dotdigital in
January 2020 as Chairman. He has over
35 years of main board experience with
AIM, FTSE 250 and FTSE 100 listed
companies, during which he has
consistently created value for shareholders
through organic and acquisitive growth.
He has experience of running UK and
international operations in a broad range
of business environments with a focus
on the software and technology sector.
Mike is currently also a Non-Executive
Director and Chair of the Remuneration
Committee of Epwin Group plc. His prior
experience includes: main board Director
and Joint Chief Operating Officer of
Misys Group plc, Chief Executive of Huon
Corporation, Chief Executive of Marlborough
Stirling plc, Chairman of Digital Healthcare
Ltd, Non-Executive Director and Chair of
Remuneration Committee of Headlam
Group plc, Non-Executive Director and
Chair of Remuneration Committee of Psion
Group plc, Non-Executive Director and Chair
of Remuneration Committee of Stroud &
Swindon Building Society, Non-Executive
Director and senior independent Director
of Helphire Group, Chief Executive Officer
of West Bromwich Albion Group PLC and
Chairman of EMIS Group plc.
Liz Joined the Board on 1 May 2020 and
also chairs the Audit Committee. She
is a highly experienced executive and
Non-Executive Director with a career
spanning the Financial Services, Data and
Software sectors. After an early career with
Lloyds Bank, Liz qualified as a Chartered
Accountant with Ernst & Young.
Liz was Chief Financial Officer for Callcredit
(now Transunion), a successful consumer
data business, where as a founder member,
she oversaw its rapid growth from start-
up in 2000 to a £150m revenue business
by 2015. During that period, she was
instrumental in the purchase and integration
of several successful acquisitions and has
end-to-end experience of significant private
equity and trade corporate transactions.
Liz currently also holds Non-Executive
Director and Audit Committee Chair
positions at both LINK Scheme Ltd and
Tracsis plc, as well as two pro bono roles -
Governor and Chair of Audit for Leeds
Trinity University and Trustee and Chair
of Finance and Investment for Yorkshire
Cancer Research.
She brings experience of high-growth
acquisitive business, and financial, audit
and governance expertise to the Board
at dotdigital.
Annual Report 2019/2020
31
GOVERNANCE
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 29 of the Group’s annual
report. The risk section of the Annual Report is on pages 22
to 26 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 at
www.dotdigitalgroup.com.
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 the Company 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 them with 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 participation 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 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.
32
dotdigital Group Plc
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 pages 27 to 29.
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.
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 26.
Executive Directors
Milan Patel
Paraag Amin
Non-Executive Directors
Tink Taylor
Boris Huard
Michael O’Leary
Elizabeth Richards
Board
Audit
Committee
Risk
Committee
Remuneration
Committee
Nomination
Committee
Attended Total
Attended Total
Attended Total
Attended Total
Attended Total
1
1
1
1
1
1
1
1
2
2
2
2
11
11
11
11
5
5
11
11
6
2
6
2
5. Maintain the Board as a well-functioning, balanced team
led by the Chair (fully complies)
The Group is managed by a Board of Directors chaired by Mike
O’Leary. The Board is responsible for taking all major strategic
decisions and also 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 as at the Board
on 28 January 2020 and will be reviewed annually.
The Board currently consists of two Executive Directors and
three Independent Non-Executive Directors. The Non-Executives
spend a minimum of two days a month on dotdigital Group
business matters. 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.
The Board believes it is appropriate to have a Senior
Independent Non-Executive Director and Boris Huard currently
fulfils this role. Mike is 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.
The 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 11 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. The table above
shows attendance for the period July 2019 to June 2020.
6. Ensure that, between them, the Directors have the necessary
up-to-date experience, skills and capabilities (fully complies)
The Board considers its current composition 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.
The composition of the Board is reviewed annually by the
Nomination Committee. 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 with the ability to
decide on the election of the Company’s Board. Non-Executive
Directors that do not meet the independence criteria will also
stand for election annually, which will allow shareholders to
voice their opinion. Their biographical details can be found on
pages 30 and 31.
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 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.
Annual Report 2019/2020
33
GOVERNANCE
Corporate governance report continued
7. Evaluate Board performance based on clear and
9. Maintain governance structures and processes that are fit
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 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 complies)
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. They are constantly updated and communicated
to relevant employees. We also, within the organisation, 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.
for purpose and support good decision-making by the Board
(fully complies)
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 Committee 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 the 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 complies)
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 36 to 40.
The Group’s website www.dotdigitalgroup.com 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.
34
dotdigital Group Plc
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 reports from the Group’s auditors relating to the
systems of internal financial control and risk management;
• 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.
Composition of the Audit Committee
The Audit Committee comprises Liz Richards as Chairperson and
Boris Huard, with Mike O’Leary, Milan Patel and Paraag Amin as
attendees as appropriate. 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 13 November 2020 the Committee reviewed the
Group’s preliminary announcement of its results for the financial
year to 30 June 2020 and the draft report and accounts for that
year. The Committee received reports from the external auditors
on the conduct of their audit, their review of the accounts, including
accounting policies and areas of 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 Committee also reviewed
the report from the external auditors regarding the performance
of the internal accounting function. The review of the external
auditors was used to assess their performance and to confirm the
appropriateness of their reappointment and included assessment
of their independence, qualification, expertise and resources, and
effectiveness of their audit process.
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.
Approval
This report was approved by the Board on 17 November 2020
and signed on its behalf by:
Liz Richards
Chairman of the Audit Committee
Annual Report 2019/2020
35
GOVERNANCE
Remuneration Committee report
Statement from the Chairman of the Remuneration Committee
I am pleased to present the Remuneration Committee Report for
2020, which sets out the remuneration earned and paid to the
Directors in the year ended 30 June 2020.
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 Committee has taken
a number of these regulations into account in the preparation of this
report for the year as a matter of best practice.
The Committee’s Terms of Reference, which are reviewed annually
to ensure they reflect any changes in legislation, regulation and best
practice, can be found at www.dotdigitalgroup.com.
The Annual Report on Remuneration, detailed on pages 36 to 40,
provides details of the amounts earned in respect of the year ended
30 June 2020 and how the Directors’ Remuneration Policy has
operated and will be subject to an advisory shareholder vote at
the 2020 AGM.
Review of the year ended 30 June 2020
As described earlier in the annual report, the Group has performed
well during the year, delivering strong revenue of £47.4 million
and total profit before tax excluding exceptional costs and share
based payments of £13.1m. Consequently, the Executive Directors
earned an annual cash bonus against sliding scale revenue (40% of
potential) and profit before tax (60% of potential) targets equivalent
to 42% of salary out of a maximum of 100% of salary.
No share awards held by the Executive Directors vested in the
year ended 30 June 2020 although the Performance Share Plan
(“PSP”) award granted to the Chief Executive Officer in December
2017 is expected to vest in December 2020 at circa 70% of the
maximum against stretching absolute Total Shareholder Return
targets. Full details of this vesting will be set out in next year’s
Directors’ Remuneration Report.
Outlook for 2021
The 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. In respect of operating
the Remuneration Policy for 2020/21:
•
the Committee determined it was appropriate that base salaries
for the Chief Executive Officer and Chief Finance Officer should
remain unchanged at the 1 July 2020 review date;
• Annual bonus provision should remain capped at 100% of
salary with targets based on revenue and profit before tax. For
2020/21, revenue and profit targets will be weighted equally; and
• As a result of the 2017 PSP award nearing the end of the
performance period, an annual PSP grant policy will be adopted
going forwards. As such, the Chief Executive Officer is expected
to receive a PSP award over shares equal to 150% of salary in
December 2020 (and then annually thereafter) with stretching
performance targets based on Total Shareholder Return and
Earnings Per Share. Full details of the award will be set out in
next year’s Directors Remuneration Report.
Finally, 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.
On behalf of the Board
Boris Huard
Chairman of the Remuneration Committee
17 November 2020
36
dotdigital Group Plc
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
Performance measure
Base salary
To provide a competitive base
salary to attract, motivate
and retain directors with the
experience and capabilities to
achieve the strategic aims.
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.
Not applicable
Benefits
To provide market-competitive
benefits package.
Receive benefits in line with
market practice, these include
company car/allowance, private
medical, income protection and
death in service insurance.
Set a level deemed
appropriate by the
Remuneration Committee.
Not applicable
Pension
To provide an appropriate
level of retirement benefit.
Executive Directors are eligible
to participate in the Group’s
pension plan.
5% of base salary.
Not applicable
Annual
bonus
PSP
To reward performance
against annual targets
which supports the strategic
direction of Group.
Awards are based on annual
performance and are normally
paid in cash
100% of salary
Sliding scale financial
(e.g. revenue and/or profit)
and/or personal/strategic
targets
To drive and reward the
achievement of longer term
objectives, support retention
and promote share ownership
for Executive Directors.
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, normally
over a period of three years.
Awards may be subject to malus
provisions at the discretion of
the Committee.
150% of salary (or 450%
of salary where end-to-
end awards, rather than
annual grants)
Performance metrics will
be linked to financial and/or
share price and/or strategic
performance
Shareholding
guidelines
To promote share ownership
for Executive Directors.
Executive Directors are
expected to build a shareholding
in the Group over time.
200% of salary for the
Chief Executive and
100% of salary for other
Executive Directors
Not applicable
Annual Report 2019/2020
37
GOVERNANCE
Remuneration Committee report continued
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 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 CSOP scheme has now been adopted. 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 as follows:
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.
38
dotdigital Group Plc
Remuneration
The Directors’ emoluments for the year ended 30 June 2020 are as follows:
Executive Directors
P Amin
M Patel
Non-Executive Directors
T Taylor
B Huard
M O’Leary
E Richards
12-month period to 30.06.20
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Share-based
Pension payment**
£’000
£’000
Total
£‘000
Number of
outstanding
options
190
310
500
6
17
23
80
130
210
10
15
25
149
289
438
435
875,000
761 1,375,000
1,196 2,250,000
Salary/Fees
£’000
Benefits
£’000
Bonus
£’000
Share-based
Pension payment**
£’000
£’000
Total
£‘000
Number of
outstanding
options
75
35
46
8
164
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
35
46
8
164
–
–
–
–
** 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 vesting period. These are based on
challenging absolute total shareholder return performance targets. 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 Amin. To be fully paid out, the Group must achieve an annual compounded TSR of 35% over a 3-year period.
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
–
–
–
8
13
21
99
290
389
Number of
Total outstanding
options
£‘000
363
875,000
750 1,375,000
1,113 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 Amin. To be fully paid out, the Group must achieve an annual compounded TSR of 35% over a 3-year period.
Annual Report 2019/2020
39
GOVERNANCE
Remuneration Committee report continued
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
B Huard
No of
shares
held
1,575,927
22,700
1,598,627
% Holding
0.53
0.01
0.54
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 awards granted to Milan Patel and to Paraag Amin can only be exercised at the end of a 3-year vesting period, based on challenging
absolute total shareholder return performance targets. 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 and October
2021 for Paraag Amin. To fully vest, the Group must achieve an annual compounded TSR of 35% over a c.3 year period.
Composition of the Remuneration Committee
The Remuneration Committee comprises independent Non-Executive Directors, namely Boris Huard (Chairman), Mike O’Leary and Liz
Richards. 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
The Committee receives independent advice from FIT Remuneration Consultants LLP when required.
Approval
This report was approved by the Board on 17 November 2020 and signed on its behalf by:
Boris Huard
Chairman of Remuneration Committee
40
dotdigital Group Plc
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 2020.
Information relating to principal activity, review of business, key
performance indicators and future outlook is included within the
strategic report.
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 2020 are as follows:
30.06.20
30.06.19
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
omni-channel marketing automation platform and managed
services to digital marketing professionals.
Director
M Patel
T Taylor
B Huard
Number of
shares held
1,575,927
Percentage
shareholding
%
Number of
shares held
Percentage
shareholding
%
0.53
1,575,972
29,776,667
9.97 29,776,667
22,700
0.01
–
0.53
10.05
–
Review of business
During the year the Group has shown significant growth from
continuing operations in customer numbers, sales and profits.
Revenues grew from £42.5m in the year ended June 2019 to
£47.4m for the year ended June 2020, an increase of 12%.
Adjusted operating profit grew from £11.8m in the 12 months
to June 2019 to £13.1m for the year ended June 2020, an increase
of 11%.
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
2020
2019
£47.4m
£42.5m
Adjusted operating profit
£13.1m
£11.8m
ARPC
£1,083
£966
%
increase
12%
11%
12%
Dividends
The Board proposes a dividend payment of £2,480,334 comprising
an ordinary dividend of 0.83p per ordinary share (2019: £1,996,805
ordinary dividend of 0.67p 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 29.
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 34 days (2019: 94 days).
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 2020 are as follows:
Director
M Patel
P Amin
30.6.20
Number of
options held
30.6.19
Number of
options held
1,375,000
1,375,000
875,000
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 October 2020, 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
53,900,058
Tink Taylor, Founder and President
29,776,667
Octopus Investments
Investec Wealth & Investment
Slater Investments Ltd
20,161,685
16,376,100
16,322,743
Franklin Templeton Fund Management 14,550,000
Highclere International Investors
8,958,299
18.09%
10.00%
6.77%
5.50%
5.48%
4.88%
3.01%
Future outlook
The Group provides omni-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.
Directors
The Directors shown below have held office during the whole
of the period from 1 July 2019 to the date of this report.
P Amin
B Huard
M O’Leary (appointed 17 January 2020)
M Patel
E Richards (appointed 1 May 2020)
I Taylor (resigned 17 January 2020)
Annual Report 2019/2020
41
GOVERNANCE
Report of the Directors continued
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.
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 Singers are the joint brokers. The closing mid-market share
price at 30 June 2020 was 102p (2019: 105.5p).
Related party transactions
Disclosures relating to related party transactions are set out in note
26 to the Consolidated 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.
Charitable and political donations
No political donations were made by the Company.
Streamlined energy and carbon reporting
The Group is committed to reducing its environmental impact.
The new Streamlined Energy and Carbon Reporting (SECR)
regulations require us to report on our energy use.
Greenhouse (GHG) emissions
The Group’s scope 1 and 2 GHG emission sources are from office
building energy use as the Group has no business fleet vehicles.
GHG Impact Areas
Scope 1
Gas
Scope 2
Electricity
Total
Per
428,750 kWh
1,250 kWh/FTE
385,875 kWh
1,125 kWh/FTE
Total energy
814,625 kWh
2,375 kWh/FTE
Total GHG
Emissions
177,455 Kg CO2e 517Kg CO2e/FTE
0.00374kg CO2e/£ revenue
The Group are in serviced offices with little visibility on energy
consumption from landlords. The energy use and GHG emissions
were calculated by using UK average per staff member office gas
and electricity use and then applying the UK government’s 2019 GHG
emission conversion factors to calculate the carbon footprint. The
Group is gathering data in Scope 3 GHG emissions sources from
business travel, data servers and hosting, waste and water use.
The Group is in compliance with the Streamlined Energy and Carbon
Reporting requirements as a quoted company.
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.
42
dotdigital Group Plc
Charitable donations made by the Group in the year were £2,032
(2019: £715).
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 by the directors in performance of their statutory
duties in accordance with s172 (1) Companies Act 2006
The Board of Directors of dotdigital Group PLC consider, both
individually and together, that they have acted in the way they
consider, in good faith, would be most likely to promote the success
of the Group for the benefit of its members and shareholders as a
whole and, in doing so have regard (amongst other matters) to:
•
•
•
•
•
the likely consequences of any decisions in the long-term;
the interests of the Group’s employees;
the need to foster the Group’s business relationships with
suppliers, customers and others;
the impact of the Group’s operations on the community and
environment;
the desirability of the Group maintaining a reputation for high
standards of business conduct; and
•
the need to act fairly as between shareholders of the Group.
As part of a director’s induction they are briefed on their duties
and they can access professional advice on these, either from
the Company Secretary, the NOMAD or any other independent
advisor if necessary. The directors fulfil their duties partly through a
governance framework that delegates day-to-day decision-making
within authority levels to senior employees of the Group.
The following paragraphs summarise how the Directors fulfil their duties:
Risk management
We provide business critical technology for our clients across
many industries and sectors. As we grow, our business and our risk
environment also become more complex. It is therefore vital that we
effectively identify, evaluate, manage and mitigate the risks we face,
and that we continue to evolve our approach to risk management.
A Risk Committee exists within the business that meets bi-monthly
to make sure all aspects of risks are registered, mitigated or
solutions are found and executed to reduce these.
For details of our principal risks and uncertainties, and how we
manage our risk environment, please see pages 22 to 26.
Our People
The Group is committed to being a responsible business. Our
behaviour is aligned with the expectations of our people, clients,
investors, communities and society as a whole. People are at the
heart of our business. The Group has found the balance in culture
to succeed along with managing our people’s performance and
development and bringing through the talent while ensuring we
operate as efficiently as possible. We continue to ensure we share
common values that inform and guide our behaviour, so we achieve
our goals in the right way.
For further details on our people, please see page 27.
Business relationships
Our strategy prioritises organic growth, driven by cross-selling
and upselling our services to our existing customers, as well as
recommending our partners, to help our customers to drive a better
return on investment from their digital marketing and bringing
new clients into the Group. To do this, we need to develop strong
relationships with both the customers and the strong partner
ecosystem we have built. We value our suppliers and have multi-year
contracts with our key suppliers. We have a goal in the business to
make sure we aim to pay all our suppliers within their credit terms
to help develop a healthy relationship.
For further details on how we work with our clients, please see
page 27.
Community and environment
The Group’s approach is to use our position of strength to create
positive change for the people and communities with which we
interact. We are also undergoing an audit and assessment for
ISO 14001 on environmental management with the implementation
of an Integrated Management System (IMS). This year the Group
will be carbon neutral and we aim to achieve this standard into
the foreseeable future.
For further details on how we interact with communities and the
environment, please see pages 27 to 29.
Shareholders
The Board is committed to openly engaging with our shareholders,
as we recognise the importance of a continuing effective dialogue,
whether with institutional investors, private or employee shareholders.
It is important to us that our stakeholders understand our strategy
and objectives, so these must be explained clearly, feedback heard,
and any issues or questions raised, properly considered.
For further details on how we engage with our shareholders,
please see page 32.
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.
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 Director
17 November 2020
Annual Report 2019/2020
43
GOVERNANCE
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 2020 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
2020 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
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
•
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006;
• Accounting for adoption of IFRS 16 – leases
These are explained in more detail below.
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.
Audit scope
•
We conducted audits of the complete financial information
of dotdigital Group plc, dotdigital EMEA Limited, dotdigital
Inc., dotmailer Development Limited, dotdigital APAC Pty
Limited, dotmailer SA Pty Limited, dotmailer LLC, dotdigital SG
Pte Limited, dotdigital BV, 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.
44
dotdigital Group Plc
Key audit matters
Key audit matter
Capitalisation of Development costs
During the year, the Group capitalised internally generated
development costs of £6,461,313 (30 June 2019 - £5,507,539).
These capitalised costs are being amortised over five years. The
development cost additions represent resources the Group has
invested in for 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 noted 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.
Valuation of investments and intangible assets
The Company had investments of £15,142,000 at the year ended
30 June 2020 (30 June 2019: £15,147,156).
The Group had intangible assets of £14,059,000 at the year ended
30 June 2020 (30 June 2019: £11,702,561).
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 the 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
2020 (30 June 2019: £9,679,608).
Accounting for adoption of new accounting standard
– IFRS 16 – Leases
The Group applied IFRS 16 lease retrospectively from 1 July 2019
and has not restated comparative information and recognised the
cumulative effect of initially applying the Standard as an adjustment
to the opening balance of retained earnings as disclosed in note 22.
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 improvement costs.
We vouched a sample of the costs capitalised that relate to
specific projects and created add on functions within the system.
We agreed a sample of the internal staff costs capitalised to
supporting calculations, time records and payroll calculations.
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.
We have reviewed the report and study carried out by a third party
expert regarding the Research & Development claim in respect of
these costs capitalised.
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.
We reviewed the impairment review performed by management.
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.
As all the capitalised intangibles relate to products that the
Group are using to enhance its product we consider it reasonable
that no impairment has been recognised in the period. We
have assessed management’s key assumptions for the
impairment review.
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 have performed the following audit procedures:
Obtained an understanding of the accounting of the Group’s
adoption of IFRS 16.
Verifying the completeness of underlying lease contracts
considered as to applicable for IFRS 16 as at the date of transition.
Verifying the accuracy of recognised right of use assets and lease
liabilities both on the transition date as well as the reporting date.
Ensured the reasonableness of the incremental borrowing rate
used for discounting the future lease payments.
Verifying whether the lease term used is the enforceable lease
term in accordance with IFRS 16.
Assessing the key judgements applied and estimates made by
the management and verifying whether the disclosures within the
financial statements are in accordance with IFRSs.
We are satisfied that the disclosure of the expected impact of IFRS
16 is in accordance with the Group’s stated accounting policy.
Annual Report 2019/2020
45
GOVERNANCE
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 judgment, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£590,000 (30 June 2019: £524,000).
£164,000 (30 June 2019: £165,000).
How we determined it
Based on 5% of profit before tax.
Based on 1% of gross assets.
Rationale for
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 £79,000
and £538,000.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £29,500 (Group
audit) (30 June 2019: £26,200) and £7,300 (Company audit) (30
June 2019: £8,250) 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 12
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 Development Limited, dotdigital APAC Pty Limited,
dotmailer SA Pty Limited, dotmailer LLC, dotdigital SG Pte Limited,
dotdigital BV, 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 12 reporting units,
one based in the United States of America, one in Australia, one
in Belarus, one in Singapore, one in Netherlands 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.
46
dotdigital Group Plc
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
17 November 2020
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 43, 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
conducted in accordance with ISAs (UK) will always detect a
Annual Report 2019/2020
47
FINANCIAL STATEMENTS
48
dotdigital Group Plc
Financial
Statements
Contents
Financial statements
50 Consolidated income statement
50 Consolidated statement of comprehensive income
51 Consolidated statement of financial position
52 Company statement of financial position
53 Consolidated statement of changes in equity
54 Company statement of changes in equity
55 Consolidated statement of cash flows
55 Company statement of cash flows
56 Notes to the consolidated financial statements
82 Company information
49
Annual Report 2019/2020 FINANCIAL STATEMENTS
Consolidated income statement
For the year ended 30 June 2020
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 costs
Finance income
Profit before income tax from continuing operations
Income tax expense
Profit for the year from continuing operations
Loss for the year 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
30.6.20
£’000
30.6.19
£’000
47,404
(6,366)
41,038
42,522
(4,377)
38,145
(27,976)
(26,380)
13,062
11,765
(682)
(136)
(565)
(179)
12,244
11,021
(98)
40
12,186
(1,550)
10,636
(378)
10,258
3.44
3.39
3.84
3.79
3.57
3.52
3.84
3.79
(0.13)
(0.13)
(0.00)
(0.00)
–
19
11,040
(58)
10,982
(2,457)
8,525
2.86
2.82
3.36
3.31
3.68
3.63
3.93
3.88
(0.82)
(0.81)
(0.57)
(0.57)
7
7
5
6
6
7
8
12
11
11
11
11
11
11
11
11
11
11
11
11
Consolidated statement of comprehensive income
For the year ended 30 June 2020
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
50
dotdigital Group Plc
Notes
30.6.20
£’000
10,258
30.6.19
£’000
8,525
34
(42)
10,292
8,483
10,670
(378)
10,940
(2,457)
Consolidated statement of financial position
For the year ended 30 June 2020
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
Lease liabilities
Deferred tax
Current liabilities
Trade and other payables
Financial liabilities – Interest bearing loans and borrowings
– Lease liabilities
Current tax payable
Total liabilities
Total equity and liabilities
Notes
30.6.20
£’000
30.6.19
£’000
13
14
15
17
18
19
20
20
20
20
20
22
24
21
22
9,680
14,059
5,262
29,001
12,987
25,383
38,370
67,371
1,493
6,967
(4,695)
1,372
50
45,514
50,701
3,399
2,169
5,568
9,796
–
1,068
238
11,102
16,670
67,371
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
The financial statements were approved and authorised for issue by the Board of Directors on 17 November 2020 and were
signed on its behalf by:
Milan Patel
Director
Company registration number: 06289659 (England and Wales)
Annual Report 2019/2020
51
FINANCIAL STATEMENTS
Company statement of financial position
For the year ended 30 June 2020
Assets
Non-current assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity attributable to the owners of the parent
Called up share capital
Share premium
Other reserves
Retained earnings
Total equity
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Notes
30.6.20
£’000
30.6.19
£’000
16
17
18
19
20
20
20
21
3
15,142
15,145
797
396
1,193
16,338
1,493
6,967
1,372
3,550
–
15,147
15,147
808
594
1,402
16,549
1,490
6,791
720
3,515
13,382
12,516
2,956
2,956
4,033
4,033
16,338
16,549
The financial statements were approved and authorised for issue by the Board of Directors on 17 November 2020 and were
signed on its behalf by:
Milan Patel
Director
Company registration number: 06289659 (England and Wales)
52
dotdigital Group Plc
Consolidated statement of changes in equity
For the year ended 30 June 2020
Called up
share capital
£’000
Retained
earnings
£’000
Share
premium
£’000
Retranslation
reserve
£’000
Reverse
acquisition
reserve
£’000
Other
reserves
£’000
Total
equity
£’000
Balance as at 1 July 2018
1,490
32,331
6,791
(26)
(4,695)
661
36,552
Issue of share capital
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
–
–
–
–
–
–
–
–
–
–
–
(1,903)
(2,837)
539
506
–
(3,695)
8,525
–
8,525
Balance as at 30 June 2019
1,490
37,161
Issue of share capital
Dividends
IFRS 16 restatement
Transfer in reserves
Share-based payment
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
3
–
–
–
–
3
–
–
–
Balance as at 30 June 2020
1,493
–
(1,996)
61
30
–
(1,905)
10,258
–
10,258
45,514
–
–
–
–
–
–
–
–
–
–
6,791
176
–
–
–
–
176
–
–
–
6,967
–
–
–
–
–
–
–
–
42
42
16
–
–
–
–
–
–
–
34
34
50
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(506)
565
59
–
–
–
–
(1,903)
(2,837)
539
–
565
(3,636)
8,525
42
8,567
(4,695)
720
41,483
–
–
–
–
–
–
–
–
–
–
–
–
(30)
682
652
–
–
–
(4,695)
1,372
179
(1,996)
61
–
682
(1,074)
10,258
34
10,292
50,701
Share capital is the amount subscribed for shares at nominal value.
Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.
Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the share issue
expenses.
Retranslation reserve relates to the retranslation of foreign subsidiaries into the functional currency of the Group.
The reverse acquisition reserve relates to the adjustment required to account for the reverse acquisition in accordance with
International Financial Reporting Standards.
Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2.
Annual Report 2019/2020
53
FINANCIAL STATEMENTS
Company statement of changes in equity
For the year ended 30 June 2020
Balance as at 1 July 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
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 2020
Called up
share capital
£’000
1,490
Retained
earnings
£’000
5,761
Share
premium
£’000
6,791
Other
reserves
£’000
Total
equity
£’000
661
14,703
–
–
–
–
–
–
–
1,490
3
–
–
–
3
–
–
1,493
–
(1,903)
506
–
(1,397)
(849)
(849)
3,515
–
(1,996)
30
–
(1,966)
2,001
2,001
3,550
–
–
–
–
–
–
–
6,791
176
-
-
-
176
–
–
–
–
(506)
565
59
–
–
720
-
-
(30)
682
652
–
–
–
(1,903)
–
565
(1,338)
(849)
(849)
12,516
179
(1,996)
-
682
(1,135)
2,001
2,001
6,967
1,372
13,382
Share capital is the amount subscribed for shares at nominal value.
Retained earnings represents the cumulative earnings of the Company attributable to equity shareholders.
Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the share issue
expenses.
Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2.
54
dotdigital Group Plc
Consolidated statement of cash flows
For the year ended 30 June 2020
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 intangible fixed assets
Purchase 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
Payment of lease liabilities
Loan repayments
Share issue
Net cash flows from financing activities
Net cash generated from continuing financing activities
Net cash generated from discontinued financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Company statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Cash generated from operations
Net cash generated from operating activities
Cash from investing activities
Purchase of tangible fixed assets
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
30
Notes
29
30
30
30.6.20
£’000
30.6.19
£’000
15,907
(124)
15,783
18,214
(2,431)
(6,505)
(277)
40
(6,742)
(6,741)
(1)
(1,996)
(1,127)
–
179
(2,944)
(2,884)
(60)
6,097
19,320
(34)
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
–
25,383
19,320
30.6.20
£’000
30.6.19
£’000
1,622
1,622
(3)
(3)
(1,996)
179
(1,817)
(198)
594
396
1,851
1,851
–
–
(1,903)
–
(1,903)
(52)
646
594
Annual Report 2019/2020
55
FINANCIAL STATEMENTS
Notes to the consolidated financial statements
For the year ended 30 June 2020
1. General information
dotdigital Group Plc (“dotdigital”) is a public limited company
incorporated in England and Wales and quoted on the AIM
market. 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 41.
2. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted
by the European Union (IFRSs as adopted by the EU) and
those parts of Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been
prepared under the historical cost convention.
The Group has applied all accounting standards and
interpretations issued by the International Accounting
Standards Board and the IFRS Interpretations Committee
effective at the time of preparing the financial statements.
New and amended standards adopted by the Company
The Group has applied IFRS 16 Leases for the first time for
the year commencing 1 July 2019. The Group has applied
the modified approach from 1 July 2019 but has not restated
comparatives for the year ended 30 June 2019, as permitted
under the specific transitional provisions in the standard.
The reclassifications and the adjustments arising from the
new leasing rules are therefore recognised in the opening
balance sheet on 1 July 2019.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
‘operating leases’ under the principles of IAS 17 Leases.
These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee’s
incremental borrowing rate as of 1 July 2019. The weighted
average lessee’s incremental borrowing rate applied to the
lease liabilities on 1 July 2019 was 2.7%.
For leases previously classified as finance leases, the Group
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount
of the right-of-use asset and the lease liability at the date of
initial application. The measurement principles of IFRS 16
are only applied after that date. These finance leases were
not remeasured at the date of initial application as they are
considered immaterial.
The associated right-of-use assets for property leases and
other right-of-use assets were measured at the amount equal
to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in
the balance sheet as at 30 June 2019. There were no onerous
lease contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
•
•
the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
reliance on previous assessments on whether leases
are onerous
•
•
•
the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 July 2019 as short-
term leases
the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
the use of hindsight in determining the lease term where
the contract contains options to extend or terminate
the lease.
The Group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application. Instead,
for contracts entered into before the transition date, the Group
relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a lease.
New standards and interpretations not yet adopted
There are no standards that are not yet effective and that
would be expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable
future transactions.
The financial statements are presented in sterling (£), rounded
to the nearest thousand pounds.
Basis of consolidation
In the period ended 2009, the Company acquired via a share
for share exchange the entire issued share capital of dotdigital
EMEA Limited, whose principal activity is that of providing
SaaS via a leading omni-channel marketing automation
platform and managed services to digital marketing
professionals.
Under IFRS 3 ‘Business combinations’ the dotdigital EMEA
Limited share exchange has been accounted for as a reverse
acquisition. Although these consolidated financial statements
have been issued in the name of the legal parent, the
Company it represents in substance is a continuation of the
financial information of the legal subsidiary, dotdigital EMEA
Limited. The following accounting treatment has been applied
in respect of the reverse acquisition:
•
•
the assets and liabilities of the legal subsidiary, dotdigital
EMEA Limited, are recognised and measured in the
consolidated financial statements at their pre-combination
carrying amounts, without restatement to their fair value;
the retained reserves recognised in the consolidated
financial statements for the beginning of the prior period
reflect the retained reserves of dotdigital EMEA Limited
to 30 April 2008. However, in accordance with IFRS3
‘Business combinations’, the equity structure appearing in
the consolidated financial statements reflects the equity
structure of the legal parent dotdigital Group Plc, including
the equity instruments issued under the share exchange
to effect the business combination;
• a reverse acquisition reserve has been created to enable
the presentation of a consolidated balance sheet which
combines the equity structure of the legal parent with the
non-statutory reserves of the legal subsidiary;
• comparative numbers are prepared on the same basis.
56
dotdigital Group Plc
The following accounting treatment has been applied in
respect of the acquisition of dotdigital Group Plc:
•
•
the assets and liabilities of dotdigital Group Plc are
recognised and measured in the consolidated financial
statements at their fair value at the date of acquisition.
the cost of an acquisition is measured as the fair value of
the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition. Identifiable assets
acquired and liabilities assumed in a business combination
are measured initially at their fair values at the date of
acquisition, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the
fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If the cost of
acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognised
directly in the income statement.
Subsidiaries
A subsidiary is an entity whose operating and financing
policies are controlled by the Group. Subsidiaries are
consolidated from the date on which control was transferred to
the Group. Subsidiaries cease to be consolidated from the date
the Group no longer has control. Intercompany transactions,
balances and unrealised gains on transactions between Group
companies have been eliminated on consolidation.
The Group applies the acquisition method to account for
business combinations. In the statement of financial position,
the acquiree’s identifiable assets and liabilities are initially
recognised at their fair values at the acquisition date.
As a result of applying reverse acquisition accounting since
30 January 2009, the consolidated IFRS financial information
of dotdigital Group Plc is a continuation of the financial
information of dotdigital EMEA Limited.
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of services in the ordinary course
of the Group’s activities. Revenue is shown net of value added
tax returns, rebates and discounts after eliminating sales
within the Group.
The Group recognises revenue when the amount of revenue
can be reliably measured and it is probable that the future
economic benefits will flow to the entity. The Group bases
its estimates on historical results, taking into consideration
the type of customer, the type of transaction and the specifics
of each arrangement.
The Group sells omni-channel marketing services to other
businesses, and services are either provided on a usage basis
or fixed price bespoke contract. All revenue is from contracts
signed with new customers and upgrades and additional
functional recurring revenue sold to existing contracted clients.
Revenue from contracts is recognised under percentage
of completion method based on a percentage of services
performed to date as a percentage of the total services to
be performed.
Professional services at no charge: The Group sells
professional services to its customers and there are occasions
when these services are provided at no cost as part of
the contract sold. The services provided for no charge are
recognised and accounted for as separate performance
obligations when the service occurs. The amount allocated
to the services is deducted from the contract value and the
remainder of the contract value is spread evenly over the term
of the contract.
Prepaid contracts: The Group sells 12-, 24- and 36-month
contracts to its customers. This revenue is recognised monthly
over the period of the contract. Where a customer prepays
their contract, this is recognised over the period of the contract
irrespective of materiality.
Term contract billing: The Group raises the first invoice to
its new customers when the service agreement is signed.
Occasionally, the service does not start in the same month
as when the service agreement is signed but is invoiced in
the month where the service agreement is signed. The revenue
is then recognised over the period of the contract irrespective
of materiality.
Going concern
The Directors, at the time of approving the financial
statements, have a reasonable expectation that the Company
and the Group have adequate resources to continue in
operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in
preparing the financial statements. Further detail is contained
in the Directors’ report. The impact of Covid-19 is discussed
within the CEO report and Risk section in the front end of
the report.
Operating profit
Operating profit is stated after charging operating expenses
but before finance costs.
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.
Annual Report 2019/2020
57
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
2. Accounting policies continued
Intangible assets are reviewed for impairment annually.
Impairment is measured by determining the recoverable amount
of an asset or cash generating unit (CGU) which is the greater of
its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and
the risks specific to the asset or CGU. For the purpose of
impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs.
• Domain names
Acquired domain names are shown at historical cost.
Domain names have a finite life and are carried at cost
less accumulated amortisation. Amortisation is calculated
using straight-line method to allocate the cost of domain
names over their useful lives of four years.
• Software
Acquired software and websites are shown at historical
cost. They have a finite life and are carried at cost less
accumulated amortisation. Amortisation is calculated
using straight-line method to allocate the cost of software
and websites over their useful lives of four years.
• Product development
Product development expenditure is capitalised when it
is considered that there is a commercially and technically
viable product, the related expenditure is separately
identifiable and there is a reasonable expectation that the
related expenditure will be exceeded by future revenues.
Following initial recognition, product developments are
carried at cost less any accumulated amortisation and
any accumulated impairment losses. The useful lives of
these intangible assets are assessed to have a finite life
of five years. Amortisation is charged on assets with
finite lives, and until economic benefit can be received
and recognised, this expense is taken to the income
statement and useful lives are reviewed on an annual
basis. Amortisation is charged from the point when the
asset is available for use.
Other development expenditures that do not meet
these criteria are recognised as an expense as incurred.
Capitalised development costs are recorded as intangible
assets and amortised from the point at which they are
ready for use on a straight-line basis over their useful life.
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
58
dotdigital Group Plc
– The expenditure attributable to the intangible asset
during its development can be reliably measured.
• Technology
Technology represents the cost that would be incurred
to build the entire Comapi platform had the acquisition
not occurred. The useful life of this intangible asset is
assessed to have a finite life of 10 years. Amortisation
is charged on assets with finite lives, and until economic
benefit can be received and recognised, this expense
is taken to the income statement and useful lives are
reviewed on an annual basis. Amortisation is charged
from the point when the asset is available for use.
• Customer relationships
This represents the value of high-value customer contracts
within Comapi. The useful life of this intangible asset is
assessed to have a finite life of three years. Amortisation
is charged on assets with finite lives, and until economic
benefit can be received and recognised, this expense
is taken to the income statement and useful lives are
reviewed on an annual basis. Amortisation is charged
from the point when the asset is available for use.
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount
of the cash generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that
the asset may be impaired.
Property, plant and equipment
Tangible non-current assets are stated at historical cost less
accumulated depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assets’ carrying amount
or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits are associated with
the item will flow to the Company and the cost of the item can
be measured reliably. The carrying amount of the replaced
part is derecognised. All other repairs and maintenance
are charged to the income statement during the financial
period in which they are incurred. Depreciation is provided
at the following rates in order to write off each asset over its
estimated useful life and is based on the cost of assets less
residual value. Significant components of individual assets
are assessed and if a component has a useful life that is
different from the remainder of that asset, that component
is depreciated separately.
Right of use assets:
over the term of the lease
Fixtures and fittings:
25% on cost
Computer equipment: 25% on cost
The assets’ residual values and useful economic lives are
reviewed and adjusted, if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable value.
Gains and losses on disposals are determined by comparing
the proceeds with the carrying amount and are recognised
within other (losses) or gains in the income statement.
Capital risk management
The Group manages its capital to ensure it is able to
continue as a going concern while maximising the return to
stakeholders through the optimisation of the debt and equity
balance. The capital structure of the Group consists of cash
equivalents and equity attributable to the owners of the parent
as disclosed in the statement of changes in equity.
Taxation
The tax expense for the year comprises current and deferred
tax. Tax is recognised in the income statement, to the extent
that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in
equity, respectively.
Current tax
Current taxes are based on the results shown in the financial
statements and are calculated according to local tax rules,
using tax rates enacted or substantially enacted by the
balance sheet date.
Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the financial statements.
Deferred income tax assets are recognised to the extent that
it is probable that future taxable profit will be available against
which the temporary difference will be utilised.
Deferred income tax is determined using tax rates that
have been enacted or substantially enacted by the balance
sheet date and are expected to apply when the related
deferred income asset is realised or deferred income tax
liability is settled.
Leases
As described in note 1, the Group has applied IFRS 16 using
the modified retrospective approach with effect from 1 July
2019 and therefore comparative information has not been
restated. Comparative information is therefore still reported
under IAS 17 and IFRIC 4.
Accounting policy applicable before 1 July 2019:
Rentals applicable to operating leases where substantially all
of the benefits and risks of ownership do not transfer to the
lessee are charged to the income statement on a straight line
basis over the period of the lease.
Accounting policy applicable from 1 July 2019:
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
‘operating leases’ under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee’s incremental
borrowing rate as of 1 July 2019. The weighted average
lessee’s incremental borrowing rate applied to the lease
liabilities on 1 July 2019 was 2.7%.
For leases previously classified as finance leases, the Group
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount
of the right-of-use asset and the lease liability at the date of
initial application. The measurement principles of IFRS 16
are only applied after that date. These finance leases were
not remeasured at the date of initial application as they are
considered immaterial.
Operating lease commitments disclosed as at 30 June 2019
Discounted using the incremental borrowing rate at 1 July 2019
Add: finance lease liabilities recognised as at 30 June 2019
Lease liability recognised as at 1 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
2019
£’000s
5,370
5,760
5
5,765
985
4,780
5,765
The associated right-of-use assets for property leases and other right-of-use assets were measured at the amount equal to the
lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance
sheet as at 30 June 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use
assets at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
Properties
Motor vehicles
Total right-of-use assets
30 June
2020
£’000s
5,376
82
5,458
1 July
2019
£’000s
5,678
82
5,760
Annual Report 2019/2020
59
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
2. Accounting policies continued
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
• Right-of-use assets - increased by £5,760,374
• Accruals and contract liabilities – decreased by £78,034
• Lease liabilities – increase by £5,760,374
• The net impact on retained earnings on 1 July 2019 was a decrease of £78,034
Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for the year ended 30 June 2020 all increased as a result of the
change in accounting policy. Lease liabilities are now included in segment liabilities, whereas finance lease liabilities were
previously excluded from segment liabilities. The following segments were affected by the change in policy:
EMEA
US
APAC
Core
CPaaS
Adjusted
Profit before
income tax
£’000s
Segment
assets
£’000s
Net current
assets
£’000s
11,109
666
(39)
61,016
4,857
1,574
25,905
845
(546)
11,736
67,447
26,204
Adjusted
Profit before
income tax
£’000s
12,113
(377)
Segment
assets
£’000s
65,181
2,266
Net current
assets
£’000s
27,977
(1,773)
11,736
67,447
26,204
Adjusted earnings per share for all operations and for
continuing operations decreased by 0.03p per share for the
year to 30 June 2020 as a result of the adoption of IFRS 16.
There was no impact on the adjusted earnings per share for
discontinued operations for the year to 30 June 2020.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
•
•
•
•
•
the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
reliance on previous assessments on whether leases
are onerous
the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 July 2019 as short-
term leases
the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
the use of hindsight in determining the lease term
where the contract contains options to extend or terminate
the lease.
The Group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application. Instead,
for contracts entered into before the transition date the Group
relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a lease.
The Group’s leasing activities and how these are
accounted for
The Group leases various offices, equipment and cars. Rental
contracts are typically made for fixed periods of 1 to 10 years
but may have extension options as described in (i) below.
60
dotdigital Group Plc
Lease terms are negotiated on an individual basis and contain
a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets
may not be used as security for borrowing purposes.
Until 30 June 2019, leases of property, plant and equipment
and cars were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to the income
statement on a straight-line basis over the period of the lease.
From 1 July 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the
leased asset is available for use by the Group. Each lease
payment is allocated between the liability and finance cost.
The finance cost is charged to the income statement over
the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for
each period. The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments),
less any lease incentives receivable
• variable lease payment that are based on an index or
a rate
• amounts expected to be payable by the lessee under
residual value guarantees
•
the exercise price of a purchase option if the lessee
is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the
lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
•
the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement
date less any lease incentives received
• any initial direct costs, and
•
restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in the income statement. Short-term leases are leases
with a lease term of 12 months or less. Low-value assets
comprise IT equipment and small items of office furniture.
Extension and termination options
Extension and termination options are included in a number
of property and equipment leases across the Group. These
terms are used to maximise operational flexibility in terms of
managing contracts. The majority of extension and termination
options held are exercisable only by the Group and not by the
respective lessor. None of the total lease payments made in
the period to 30 June 2020 were optional.
In determining the lease term, management considers all
facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination
option. Extension options (or periods after termination
options) are only included in the lease term if the lease
is reasonably certain to be extended (or not terminated).
Potential future cash outflows have not been included in the
lease liability because it is not reasonably certain that the
leases will be extended (or not terminated), the amount of
these cash flows is uncertain as several rounds of rent reviews
are due before this extension date.
Financial instruments
Financial assets and financial liabilities are recognised on the
statement of financial position when an entity becomes a party
to the contractual provisions of the instruments. Financial
assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in the income statement.
Financial assets
The Group’s accounting policies for financial assets are set
out below.
Management determine the classification of its financial
assets at initial recognition depending on the purpose
for which the financial assets were acquired and, where
allowed and appropriate, revaluate this designation at every
reporting date.
All financial assets are recognised on a trade date when,
and only when, the Group becomes a party to the contractual
provisions of an instrument. When financial assets are
recognised initially, they are measured at fair value plus
transaction costs, except for those finance assets classified
as at fair value through profit or loss (‘FVTPL’), which are
initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets at FVTPL, ‘held-to-maturity’
investments, ‘available for sale’ (AFS) financial assets and
loans and receivables. The classification depends on the
nature and purpose of the financial assets and is determined
at the time of recognition.
Financial assets are classified into the following specified
categories: financial assets at FVPL, ‘amortised cost’ or
‘fair value through other comprehensive income’ (‘FVOCI’).
The classification depends on the nature and purpose of the
financial assets and is determined at the time of recognition.
Financial assets are assessed for indicators of impairment at
each balance sheet date. Financial assets are impaired where
there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial
asset, the estimated future cash flows of the investment have
been impacted.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually, the Group recognises lifetime expected credit
losses (‘ECL’) when there has been a significant increase in
credit risk since initial recognition. However, if the credit risk on
the financial instrument has not increased significantly since
initial recognition, the Group measures the loss allowance for
that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected life
of a financial instrument. In contrast, 12-month ECL represents
the portion of lifetime ECL that is expected to result from
default events on a financial instrument that are possible
within 12 months after the reporting date.
On derecognition of a financial asset measured at amortised
cost, the difference between the asset’s carrying amount
and the sum of the consideration received and receivable is
recognised in profit or loss.
• Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and
on hand, demand deposits with banks and other financial
institutions, and short-term, highly liquid investments
that are readily convertible into known amounts of cash
and which are subject to an insignificant risk of changes
in value, having been within three months of maturity at
acquisition. Bank overdrafts that are repayable on demand
and form an integral part of the Group’s cash management
are also included as a component of cash and cash
equivalents for the purpose of the consolidated statement
of cash flows
• Trade receivables
Trade receivables are recognised initially at the lower of
their original invoiced value and recoverable amount. A
provision is made when it is likely that the balance will not
be recovered in full. Terms on receivables range from 30
to 90 days.
Annual Report 2019/2020
61
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
2. Accounting policies continued
• Financial liabilities and equity
Financial liabilities and equity are recognised on the
Group’s statement of financial position when the Group
becomes a party to a contractual provision of an
instrument. Financial liabilities and equity instruments
issued by the Group are classified according to the
substance of the contractual arrangements entered into
and the definitions of a financial liability and an equity
instrument. An equity instrument is any contract that
evidences a residual interest in the assets of the Group
after deducting all of its liabilities. Equity instruments
issued by the Group are recognised at the proceeds
received, net of transaction costs.
Other reserves relate to the charge for share-based payments
in accordance with IFRS 2 ‘Share-based Payments’.
Share-based payments
For equity-settled share-based payment transactions the
Group, in accordance with IFRS 2 ‘Share-Based Payments’
measures their value, and the corresponding increase in
equity, indirectly, by reference to the fair value of the equity
instruments granted. The fair value of those equity instruments
is measured at the grant date using the trinomial method.
The expense is apportioned over the vesting period of the
financial instrument and is based on the number which
is expected to vest and the fair value of those financial
instruments at the date of grant. If the equity instruments
granted vest immediately, the expense is recognised in full.
The Group’s financial liabilities include trade payables
and accrued liabilities.
Functional currency translation
• Functional and presentation currency
• Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the
effective interest method. Terms on accounts payable
range from 10 to 90 days.
Foreign currency risk
Currency risk is the risk that the holding of foreign currencies
will affect the Group’s position as a result of a change in
foreign currency exchange rates. The Group has no significant
foreign currency risk as most of the Group’s financial assets
and liabilities are denominated in functional currencies of
relevant Group entities. Accordingly, no quantitative market
risk disclosures or sensitivity analysis for currency risks have
been prepared.
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary
economy) that have a functional currency different from the
presentation currency are translated into the presentation
currency as follows:
(a) assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
(b) income and expenses for each income statement are
translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on
the dates of the transactions); and
(c) all resulting exchange differences are recognised in other
comprehensive income.
Equity
Share capital is the amount subscribed for shares at their
nominal value.
Share premium represents the excess of the amount
subscribed for the share capital over the nominal value
of the respective shares net of share issue expenses.
Retained earnings represent the cumulative earnings
of the Group attributable to equity shareholders.
The reverse acquisition reserve relates to the adjustment
required by accounting for the reverse acquisition in
accordance with IFRS 3 ‘Business combinations’.
Items included in the financial statements of the Company
are measured using the currency of the primary economic
environment in which the entity operates (functional
currency), which is mainly pounds sterling (£) and it is
this currency the financial statements are presented in.
• Transaction and balances
Foreign currency transactions are translated into the
functional currency using exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions
and from the translation at the year end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.
Employee benefit costs
The Group operates a defined contribution pension scheme.
Contributions payable by the Group’s pension scheme
are charged to the income statement in the period in which
they relate.
Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision maker, who is responsible for allocating resources
and assessing performance of the operating segments as
identified by the Board of Directors.
Foreign currency exchange rate risk
The Group has certain investments in foreign operations,
whose net assets are exposed to foreign currency translation
risk. As well as naturally mitigating this risk by offsetting its
cost base in the same currencies where possible, currency
exposure arising from the net assets of the Group’s foreign
operations is managed through cash balances denominated
in the relevant foreign currencies.
The Group is mainly exposed to the US Dollar, Australian Dollar,
Singaporean Dollar, Euro, Belarusian Ruble, South African Rand
and Polish Zloty currencies.
The table overleaf details the Group’s sensitivity to a 10%
increase or decrease in sterling against the relevant foreign
currencies. 10% is the sensitivity rate which represents
management’s assessment of the reasonable possible change
in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary
items and adjusts their translation at the period end of a 10%
change in foreign currency rates. A positive number below
indicates an increase in profit where sterling strengthens
62
dotdigital Group Plc
10% against the relevant currency. For a 10% weakening of
sterling against the relevant currency, there would be an equal
and opposite impact on the profit and other equity, and the
balances below would be negative or positive.
US Dollar
Australian Dollar
Singaporean Dollar
Euro*
Belarusian Ruble
South African Rand
Polish Zloty
30.6.20
£’000
30.6.19
£’000
55
7
(15)
(22)
11
2
(15)
23
77
34
(8)
–
(2)
1
2
104
* there was no foreign currency exchange rate risk against the
Euro in the prior year as dotdigital B.V was incorporated in
September 2019.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions
regarding the future. Estimates and judgements are
continually evaluated based on historical experience and
other factors, including expectations of future events that
are believed to be reasonable under the circumstances. In
the future, actual experience may differ from these estimates
and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below:
Judgements
(a) Capitalisation of development costs
Our business model is underpinned by our email and
data-driven omni--channel marketing automation platform,
dotmailer. Internal activities are continually undertaken
to enhance and maintain the product in a bid to stay
ahead of our competition. Management review the work
of developers during the period and make the following
judgements:
–
–
Internal work relating to product development is
reviewed against IAS 38 criteria and will be capitalised
if management feel the criteria have been met.
Internal work relating to the maintenance of existing
products is expensed to the income statement and
accounted for in payroll costs.
(b) Valuation of intangibles
The recognition of business combinations requires the
excess of the purchase price of acquisitions over the net
book value of assets acquired to be allocated to the assets
and liabilities of the acquired entity. The Group makes
judgements and estimates in relation to the fair value
allocation of the purchase price. If any unallocated portion
is positive it is recognised as goodwill and if negative, it is
recognised in the consolidated income statement.
Judgement is required in determining the fair value of
identifiable assets, liabilities and contingent assets and
liabilities assumed in a business combination and the
fair value of the consideration payable. Calculating the
fair values involves the use of significant estimates
and assumptions, including expectations about future
cash flows, discount rates and the lives of assets
following purchase.
Estimates and assumptions
(a) Estimated impairment of goodwill
The Directors have carried out a detailed impairment
review in respect of goodwill. The Group assesses at
each reporting date whether there is an indication that
an asset may be impaired, by considering the net present
value of discounted cash flow forecasts which have been
discounted at 6.2%. The cash flow projections are based
on the assumption that the Group can realise projected
sales. A prudent approach has been applied with no
residual value being factored.
Further details on the estimates and assumptions we
make in our annual impairment testing of goodwill are
included in note 13 to the financial statements. At the
period end, based on the assumptions, there was no
indication of impairment to the carrying value of goodwill.
(b) Share-based compensation
Key management believe that there will not be only one
acceptable choice for estimating the fair value of share-
based payment arrangements. The judgements and
estimates that management apply in determination of
the share-based compensation are summarised below:
– Selection of a valuation model
– Making assumptions used in determining the variables
used in a valuation model
i. expected life
ii. expected volatility
iii. expected dividend yield
iv. interest rate
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
We perform ongoing credit evaluations of our customers
and grant credit based upon past payment history,
financial conditions and anticipated industry conditions.
Customer payments are regularly monitored and a
provision for doubtful accounts is established based upon
specific situations and overall industry conditions. Hence
the provision is maintained for potential credit losses
based upon management’s assessment of the expected
collectability of all accounts receivable. In making this
assessment, management take into consideration
(i) any circumstances of which we are aware regarding a
customer’s inability to meet its financial obligations and
(ii) our judgements as to potential prevailing economic
conditions in the industry and their potential impact on
the Group’s customers.
Annual Report 2019/2020
63
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
2. Accounting policies continued
Where a general provision is set then specific rationale will
be set against this which will be a combination of looking
at historical data to ascertain the percentage of debt
which goes bad. Plus set against debts within a specific
business sector which might be facing financial difficulty,
thereby leading to a deemed higher risk of defaulting on
their debts.
(e) Lease accounting – incremental borrowing rate
IFRS 16 “Leases” requires lease payments to be
discounted using the lessee’s incremental borrowing rate.
The Group’s incremental borrowing rate, as at the date of
adoption of IFRS 16, has been based on local commercial
bank loans. Management have taken the view that specific
costs of borrowing should be applied to each lease as
this reflects the different economic conditions within
each geography and hence is more representative of
the funding facilities available in those countries.
3. Segmental reporting
dotdigital’s single line of business remains the provision of data-driven omni-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/(loss) before income tax
Total comprehensive income attributable
to the owners of the parent
Financial position
Total assets
Net current assets/(liabilities)
EMEA
£’000
43,810
33,044
11,256
30.6.2020
US
£’000
8,325
7,420
598
APAC
£’000
2,777
2,496
(46)
Total
£’000
54,912
42,960
11,808
10,098
291
(97)
10,292
60,959
26,732
4,846
1,006
1,566
(470)
67,371
27,268
Revenue from external customers is attributed to the geographical segments noted above based on the customers’ location.
There were no customers who account for more than 10% of revenue (2019: none).
All revenue is from contracts signed with new customers and upgrades and additional functional recurring revenue sold
to existing contracted clients. Revenue from contracts is recognised under percentage of completion method based on a
percentage of services performed to date as a percentage of the total services to be performed.
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
30.6.2019
US
£’000
6,957
6,099
2,812
5,441
2,657
52,100
16,771
1,717
2,938
APAC
£’000
2,113
1,926
389
385
144
732
Total
£’000
51,285
40,064
8,873
8,483
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% of revenue (2018: none).
All revenue is from contracts signed with new customers and upgrades and additional functional recurring revenue sold
to existing contracted clients. Revenue from contracts is recognised under percentage of completion method based on
a percentage of services performed to date as a percentage of the total services to be performed.
64
dotdigital Group Plc
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)
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)
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
Core
£’000
47,404
41,038
12,186
30.6.2020
CPaaS
£’000
7,508
1,922
(378)
Total
£’000
54,912
42,960
11,808
10,670
(378)
10,292
65,114
28,991
2,257
(1,723)
67,371
27,268
30.6.2019
Core
£’000
CPaaS
£’000
Total
£’000
42,522
38,145
11,040
8,763
1,919
(2,167)
51,285
40,064
8,873
10,940
(2,457)
8,483
52,263
21,177
1,698
(736)
53,961
20,441
30.6.20
£’000
16,448
1,698
290
18,436
30.6.20
4
164
103
67
338
30.6.19
£’000
17,029
1,728
354
19,111
30.6.19
6
177
100
63
346
During the year the Group also capitalised staff-related costs of £4,803,204 (2019: £4,924,505) in relation to internally generated
development costs.
5. Exceptional costs
Continuing exceptional costs incurred in the year relate to the ongoing acquisition costs of Comapi of £15,714 (2019: £58,824)
and amortisation of acquired intangibles of £120,000 (2019: £120,000).
Discontinued exceptional costs in the year relate to the amortisation of acquired intangibles of £381,072 (2019: £401,709)
and impairment of acquired intangibles of £nil (2019: £344,235).
Annual Report 2019/2020
65
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
6. Net finance income
Finance income:
Deposit account interest
Finance cost:
Finance lease interest
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
Auditor’s 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
Gain on disposal of tangible asset
Staff welfare
Other costs
Management charge
Total administration costs
30.6.20
£’000
30.6.19
£’000
40
(98)
(58)
19
–
19
30.6.20
£’000
1,727
4,639
6,366
30.6.20
£’000
17,929
–
–
64
3,647
1,475
479
2,404
1,248
(120)
509
176
(3)
399
531
(762)
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)
27,976
26,380
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
– 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
66
dotdigital Group Plc
30.6.20
£’000
30.6.19
£’000
22
47
3
72
20
47
5
72
30.6.20
£’000
758
792
1,550
30.6.19
£’000
129
(71)
58
Analysis of the tax charge from discontinuing operations:
Current tax on profits for the year
Deferred tax on origination and reversal of timing differences
Factors affecting the tax charge:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the average rate of corporation
tax suffered globally: 19% (2019: 19%)
Effects of:
Expenses not deductible
Research and development enhanced claim
Expenditure permitted on exercising options
Overseas tax losses
Depreciation in excess of capital allowances
Group relief losses brought forward
Current tax on profit for the year
Deferred tax on origination and reversal of timing differences
Total tax charge for the year
30.6.20
£’000
–
–
–
30.6.20
£’000
11,808
2,244
359
(2,069)
(98)
(20)
843
(501)
758
792
1,550
30.6.19
£’000
290
–
290
30.6.19
£’000
8,873
1,686
151
(2,327)
–
(70)
689
–
129
(71)
58
Deferred tax was calculated using the rate 19% (2019: 19%). For further details on deferred tax see note 24.
Taxation for each region is calculated at the rates prevailing in the respective jurisdiction.
The main rate of UK corporation tax in the period was 19%. In March 2020, the Chancellor announced that the planned reduction
in the corporation tax rate to 17% from 1 April 2020 would no longer take place, and the rate would remain at 19% going
forwards. Following a Budget resolution on 17 March 2020, the 19% rate was substantively enacted. Accordingly, UK deferred
balances have been recognised at 19% in the period.
9. Profit of Parent Company
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Parent Company is not presented
as part of these financial statements. The Parent Company’s profit before exceptional items for the financial year was
£2,698,172 (2019: loss: £848,539).
10. Dividends
Amounts recognised as distributions to equity holders in the period.
Paid dividend for year end 30 June 2020 of 0.67p (2019: 0.64p) per share
Proposed dividend for the year end 30 June 2020 of 0.83p (2019: 0.67p) per share
30.6.20
£’000
1,996
2,480
30.6.19
£’000
1,903
1,997
The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included
as a liability in these financial statements.
11. Earnings per share
Earnings per share data is based on the consolidated profit using and the weighted average number of shares in issue of the
Parent Company. Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of
all dilutive potential ordinary shares. Adjusted earnings per share is based on the consolidated profit deducting the acquisition
related exceptional costs and share-based payment.
A number of non-IFRS adjusted profit measures are used in this annual report and financial statements. Adjusting items are
excluded from our headline performance measures by virtue of their size and nature, in order to reflect management’s view of
the performance of the Group. Summarised on the next page 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.
Annual Report 2019/2020
67
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
11. Earnings per share continued
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
30.6.20
£’000
10,258
–
501
16
682
30.6.19
£’000
8,525
344
522
59
565
Adjusted profit for the year attributable to the owners of the parent
11,457
10,015
Management does not consider the above adjustments to reflect the underlying business performance. The other exceptional
costs relate to ongoing acquisition costs of Comapi.
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
30.6.20
£’000
11,454
3
30.6.19
£’000
11,726
(1,711)
Adjusted profit for the year attributable to the owners of the parent
11,457
10,015
From all operations
Basic EPS
30.6.20
Weighted
average
number of
shares
Earnings
£’000
Profit for the year attributable to the owners of the parent
10,258
298,306,813
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
11,457
298,306,813
–
3,883,050
Profit for the year attributable to the owners of the parent
10,258
302,189,863
Per share
Amount
Pence
3.44
3.84
–
3.39
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
11,457 302,189,863
3.79
From continuing operations
Basic EPS
Profit for the year attributable to the owners of the parent
10,636
298,306,813
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
11,454
298,306,813
–
3,883,050
Profit for the year attributable to the owners of the parent
10,636
302,189,863
3.57
3.84
–
3.52
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
11,454 302,189,863
3.79
From discontinued operations
Basic EPS
Loss for the year attributable to the owners of the parent
(378) 298,306,813
(0.13)
Adjusted Basic EPS
Adjusted loss for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
3
–
298,306,813
3,883,050
(0.00)
–
Loss for the year attributable to the owners of the parent
(378) 302,189,863
(0.13)
Adjusted Diluted EPS
Adjusted loss for the year attributable to the owners of the parent
3 302,189,863
(0.00)
68
dotdigital Group Plc
From all operations
Basic EPS
30.6.19
Weighted
average
number of
shares
Earnings
£’000
Profit for the year attributable to the owners of the parent
8,525
298,030,565
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
10,015
298,030,565
–
4,390,083
Profit for the year attributable to the owners of the parent
8,525
302,420,648
Per share
Amount
Pence
2.86
3.36
–
2.82
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
10,015 302,420,648
3.31
From continuing operations
Basic EPS
Profit for the year attributable to the owners of the parent
10,982
298,030,565
Adjusted Basic EPS
Adjusted profit for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
11,726
298,030,565
–
4,390,083
Profit for the year attributable to the owners of the parent
10,982
302,420,648
3.68
3.93
–
3.63
Adjusted Diluted EPS
Adjusted profit for the year attributable to the owners of the parent
11,726 302,420,648
3.88
From discontinued operations
Basic EPS
Loss for the year attributable to the owners of the parent
(2,457) 298,030,565
(0.82)
Adjusted Basic EPS
Adjusted loss for the year attributable to the owners of the parent
Options and warrants
Diluted EPS
(1,711) 298,030,565
–
4,390,083
(0.57)
–
Loss for the year attributable to the owners of the parent
(2,457) 302,420,648
(0.81)
Adjusted Diluted EPS
Adjusted loss for the year attributable to the owners of the parent
(1,711) 302,420,648
(0.57)
Weighted average number of shares
Basic EPS
Diluted EPS
30.6.20
Shares
298,306,813
30.6.19
Shares
298,030,565
302,189,863
302,420,648
Annual Report 2019/2020
69
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
12. Continuing and discontinuing operations
The analysis between continuing and discontinued operation is as follows:
Year ended 30 June 2020
Revenue
Cost of sales
Gross profit
Administrative expense
Shared-based payments
Exceptional costs
Operating profit
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
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
13. Goodwill
Group
Cost
At 1 July
Additions
At 30 June
Impairment
At 1 July
Impairment
At 30 June
Net book value
Continuing
operations
£’000
47,404
Discontinuing
operations
£’000
7,508
(6,366)
41,038
(27,976)
(682)
(136)
12,244
40
(98)
12,186
(1,550)
10,636
(5,586)
1,922
(1,917)
–
(381)
(376)
–
(2)
(378)
–
(378)
Continuing
operations
£’000
42,522
Discontinuing
operations
£’000
8,763
(4,377)
38,145
(26,380)
(565)
(179)
11,021
19
11,040
(58)
10,982
(6,844)
1,919
(3,340)
–
(746)
(2,167)
–
(2,167)
(290)
(2,457)
Total
£’000
54,912
(11,952)
42,960
(29,893)
(682)
(517)
11,868
40
(100)
11,808
(1,550)
10,258
Total
£’000
51,285
(11,221)
40,064
(29,720)
(565)
(925)
8,854
19
8,873
(348)
8,525
30.6.20
£’000
30.6.19
£’000
13,192
13,192
–
–
13,192
13,192
3,512
–
3,512
9,680
3,512
–
3,512
9,680
Goodwill is allocated to the Group’s two cash generating units identified, that being dotdigital and Comapi.
Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently
if there are indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated, at acquisition,
to cash generating units (CGUs) that are expected to benefit from that business combination.
The carrying amount of goodwill relates to the Group’s two trading activities and business segments. This has been tested for
impairment during the current period by comparison with the recoverable amounts of the CGU. Recoverable amounts for CGUs
are based on the higher of value in use and fair value less costs to sell. The recoverable amounts of the CGU have been determined
from value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by
management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rate
for the continuing operations of the Group. These long-term growth rates are management’s estimates. The discount rates used
are pre-tax and reflect specific risks relating to the continuing operations of the Group.
70
dotdigital Group Plc
The key assumptions for the value in use calculations are those regarding discount rates, growth rates, and expected
changes in margins.
Discount rate
Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of
money and the risks specific to the CGUs. The pre-tax discount rate used to calculate the value in use is 6.2% (2019: 6.2%).
Growth rates
The growth rate is stated as the compound annual growth rates in the initial five years for the continuing operations of the Group
which are then used for impairment testing. These are performed using the projected cash flows based on budgets approved
by management over a five-year period. Cash flow projections from the sixth year onwards are based on an estimated constant
growth rate. The growth rate used to calculate the value in use is 12% (2019: 19%).
Gross profit margin
Changes in income and expenditure are based on experience and expectations of the future changes in the market. The impairment
review is based on these estimated gross profit margins which were included with the budgets approved by management over a
five-year period. From the sixth year onwards, an assumed constant margin is used. The gross profit margin used to calculate the
value in use is 86% (2019: 90%).
The valuations indicate sufficient headroom such that a reasonably possible change in key assumptions would not result in
impairment of goodwill.
Sensitivity analysis
The principal variables used, being both the discount rate and growth rates, these would need to change before an impairment
is required, this being 155% discount rate and growth rate of (17%).
14. Intangible assets
Group
Cost
At 1 July 2019
Additions
At 30 June 2020
Amortisation
At 1 July 2019
Amortisation for the year
At 30 June 2020
Net book value
At 30 June 2020
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
Customer
relationships
£’000
Technology
£’000
Computer
software
£’000
Internally
generated
development
costs
£’000
Domain
names
£’000
1,205
–
1,205
824
381
1,205
–
1,200
–
1,200
190
120
310
890
911
43
954
697
96
793
20,794
6,461
27,255
10,706
3,549
14,255
161
13,000
41
1
42
32
2
34
8
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
Totals
£’000
24,151
6,505
30,656
12,449
4,148
16,597
14,059
Totals
£’000
18,534
5,617
24,151
8,747
3,358
344
12,449
11,702
Development cost additions represents resources the Group has invested in the development of new, innovative and ground-
breaking technology products for marketing professionals. This platform allows them to create, send and automate marketing
campaigns. Following development of the products the Group intends to licence the use of the platform.
Technology represents the cost that would be incurred to build the entire Comapi platform had the acquisition not occurred.
Customer relationships represent the value of high-value customer contracts within Comapi.
Annual Report 2019/2020
71
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
15. Property, plant and equipment
Group
Cost
At 1 July 2019
Additions
Disposals
Adjustment on transition of IFRS 16
Exchange differences
At 30 June 2020
Depreciation
At 1 July 2019
Depreciation for the year
Disposals
Exchange differences
At 30 June 2020
Net book value
At 30 June 2020
Group
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
Right of Use
assets
£000
Short
leasehold
£’000
Fixtures &
fittings
£’000
Computer
equipment
£’000
–
63
–
5,335
60
5,458
-
1,122
(61)
(3)
1,058
4,400
646
78
–
–
6
730
402
63
–
–
465
265
779
22
(30)
–
(1)
770
554
77
–
1
632
138
2,014
4,169
459
5,262
Short
leasehold
£’000
Fixtures &
fittings
£’000
Computer
equipment
£’000
Totals
£’000
3,719
340
(30)
5,335
67
9,431
2,682
1,548
(61)
–
Totals
£’000
3,255
456
8
3,719
2,209
465
8
2,682
2,294
177
–
–
2
2,473
1,726
286
–
2
2,000
291
3
2,294
1,388
333
5
1,726
612
32
2
646
340
61
1
402
244
643
133
3
779
481
71
2
554
225
568
1,037
Included in the net carrying amount of property, plant and equipment as at 30 June 2020 are the right-of-use assets as follows:
Group
Cost
Transition on adoption of IFRS 16
Re-measurement of existing lease liabilities
Termination of leases
Additions
Foreign currency translation
At 1 July 2019
Depreciation
Depreciation for the year
Termination of leases
Foreign currency translation
At 30 June 2020
Net book value
At 30 June 2020
72
dotdigital Group Plc
Properties
£’000
Motor
vehicles
£’000
5,678
(156)
(269)
63
60
5,376
1,079
(61)
(3)
1,015
4,361
82
–
–
–
–
82
43
–
–
43
39
Totals
£’000
5,760
(156)
(269)
63
60
5,458
1,122
(61)
(3)
1,058
4,400
16. Investments
Company
Cost
At 1 July
Disposals
At 30 June
Impairment
At 1 July and 30 June
Net book value
At 30 June
Shares in
Group
undertakings
30.6.20
£’000
Shares in
Group
undertakings
30.6.19
£’000
18,666
18,666
(5)
–
18,661
18,666
3,519
3,519
15,142
15,147
The Group’s or the Company’s investments at the balance sheet date in the share capital of companies include the following:
Subsidiaries
Nature of business
dotdigital EMEA Limited
Web and email marketing
dotdigital Inc
Web and email marketing
dotdigital APAC Pty Limited
Web and email marketing
dotdigital B.V.
Web and email marketing
dotmailer Development Ltd
Holding company
dotmailer SA Pty
dotmailer LLC
dotdigital SG Pte Limited
Development hub
Development hub
Development hub
Dynmark International Ltd
Omni-channel communication platform
Dynmark S.p z.o.o
Omni-channel communication platform
Class of share
Ordinary
Ordinary A
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
All of the above subsidiaries have been included within the consolidated results. dotdigital EMEA Limited and Dynmark
International Limited were incorporated in England and Wales. dotdigital Inc was incorporated in Delaware (US), dotdigital APAC
Pty Limited was incorporated in New South Wales (Australia), dotdigital B.V. was incorporated in Netherlands, dotdigital SG Pte
Ltd was incorporated in Singapore, dotmailer SA Pty was incorporated in South Africa, dotmailer LLC was incorporated in the
Republic of Belarus and Dynmark S.p. z.o.o. was incorporated in Poland.
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 assets
Group
30.6.20
£’000
Company
30.6.19
£’000
30.6.20
£’000
30.6.19
£’000
10,364
(1,589)
8,775
194
–
–
–
4,018
12,987
9,155
(999)
8,156
218
–
–
392
3,456
12,222
–
–
–
3
694
11
–
89
797
–
–
–
–
692
14
–
102
808
Further details on the above can be found in note 23.
Included within prepayments is an amount of £404,150 (2019: £662,912) in relation to deferred commission which is considered
to be long term. The Group has applied IFRS 9 simplified approach to measuring expected credit losses, the balances have been
assessed based on each entitiy’s ability to repay amounts owed and no expected credit loss has been recognised.
Annual Report 2019/2020
73
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
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
298,547,645 (2019: 298,030,565)
Group
Company
30.6.20
£’000
25,383
25,383
30.6.19
£’000
19,320
19,320
Nominal
value
£0.005
30.6.20
£’000
396
396
30.6.20
£’000
1,493
1,493
30.6.19
£’000
594
594
30.6.19
£’000
1,490
1,490
During the reporting period the Company undertook the following transactions involving the issuing of share capital:
On 18 December 2019 an employee exercised their share options, increasing the issued share capital by 250,000 shares
at a premium price of 28p.
On 18 December 2019 an employee exercised their share options, increasing the issued share capital by 267,080 shares
at a premium price of 39.75p.
Other
reserves
£’000
720
–
–
–
(30)
–
–
682
1,372
Other
reserves
£’000
661
–
–
(506)
–
–
–
565
720
Totals
£’000
39,993
176
(1,996)
10,258
–
61
34
682
49,208
Totals
£’000
35,062
(1,903)
8,525
–
(2,837)
539
42
565
39,993
Reverse
acquisition
reserve
£’000
(4,695)
Retranslation
reserve
£’000
16
20. Reserves
Group
As at 1 July 2019
Issue of share capital
Dividends
Profit for the year
Transfer of reserves
IFRS 16 restatement
Other comprehensive income:
Currency translation
Share-based payments
Retained
earnings
£’000
37,161
–
(1,996)
10,258
30
61
–
–
Share
premium
£’000
6,791
176
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance as at 30 June 2020
45,514
6,967
(4,695)
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)
Retranslation
reserve
£’000
(26)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34
–
50
–
–
–
–
–
42
–
16
Balance as at 30 June 2019
37,161
6,791
(4,695)
74
dotdigital Group Plc
Company
As at 1 July 2019
Issue of share capital
Dividends
Profit for the year
Transfer of reserves
Share-based payments
As at 30 June 2020
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
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
3,515
–
(1,996)
2,001
30
–
Share
premium
£’000
6,791
176
–
–
–
–
Other
reserves
£’000
720
–
–
–
(30)
682
Totals
£’000
11,026
176
(1,996)
2,001
–
682
3,550
6,967
1,372
11,889
Retained
earnings
£’000
5,761
–
(1,903)
(849)
506
–
Share
premium
£’000
6,791
–
–
–
–
–
3,515
6,791
Other
reserves
£’000
661
–
–
–
(506)
565
720
Totals
£’000
13,213
–
(1,903)
(849)
–
565
11,026
Group
30.6.20
£’000
Company
30.6.19
£’000
30.6.20
£’000
30.6.19
£’000
1,732
3,975
–
50
179
1,801
6,034
9,796
–
81
150
1,162
5,728
10
2,899
–
–
–
47
59
3,932
–
–
–
42
11,096
2,956
4,033
Further details on liquidity and interest rate risk can be found in note 23. Amounts due to subsidiaries are non-interest bearing
and are repayable on demand.
22. Leasing liabilities
Group
As at July 2019
Transition on adoption of IFRS 16
Re-measurement of existing lease liabilities
Termination of leases
Additions
Principal repayments
Interest
Foreign currency translation
At 30 June 2020
Current
Non-current
At 30 June 2020
Properties
£’000
–
5,678
(162)
(264)
63
(1,084)
136
60
4,427
1,034
3,393
4,427
Motor
vehicles
£’000
–
82
–
–
–
Totals
£’000
–
5,760
(162)
(264)
63
(44)
(1,128)
2
–
40
34
6
40
138
60
4,467
1,068
3,399
4,467
Annual Report 2019/2020
75
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
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
30.6.20
£’000
Company
30.6.19
£’000
30.6.20
£’000
30.6.19
£’000
8,969
25,383
34,352
1,732
-
2,030
3,762
8,766
19,320
28,086
3,975
–
1,393
5,368
708
396
706
594
1,104
1,300
10
2,899
–
2,909
59
3,932
–
3,991
The fair value of the financial assets and financial liabilities is equal to their carrying values. All financial assets are categorised
as loans and receivables and all financial liabilities are categorised as financial liabilities at amortised costs.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and whilst
retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the Group’s Risk Committee. The Board receives quarterly reports
from the Risk Committee through which it reviews the effectiveness of the processes put in place and the appropriateness
of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Company’s competitiveness and flexibility. Further details regarding these policies are set out below:
Interest rate risk
The Group’s interest rate risk arises from interest-bearing assets and liabilities. The Group has in place a policy of maximising
finance income by ensuring that cash balances earn a market rate of interest offsetting where possible cash balances, and
by forecasting and financing its working capital requirements. As at the reporting date the Group was not exposed to any
movement in interest rates as it has no external borrowings and therefore is not exposed to interest rate risk. No sensitivity
analysis has been prepared.
The Group’s working capital requirements are managed through regular monitoring of the overall cash position and regularly
updated cash flow forecasts to ensure there are sufficient funds available for its operations.
Liquidity risk
The Group’s working capital requirements are managed through regular monitoring of the overall position and regularly updated
cash flow forecasts to ensure there are funds available for its operations. Management forecasts indicate no new borrowing
facilities will be required in the upcoming financial period.
Trade and other payables of £3,712,000 (2019: £5,287,000) are expected to mature in less than a year.
76
dotdigital Group Plc
Credit risk
Credit risk arises principally from the Group’s trade receivables, as there are no trade receivables within the Company, which
comprise amounts due from customers. Prior to accepting new customers a credit check is obtained. As at 30 June 2020 there
were no significant debts past their due period which had not been provided for. The maturity of the Group’s trade receivables
is as follows:
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
30.620
£’000
6,770
911
2,683
10,364
30.6.20
£’000
1
13
1,575
1,589
30.6.20
£’000
999
1,048
(335)
(123)
1,589
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
The Group minimises its credit risk by profiling all new customers and monitoring existing customers of the Group for
changes in their initial profile. The level of trade receivables older than the average collection period consisted of a value of
£2,960,513 (2019: £2,053,528) of which £1,574,891 (2019: £972,221) was provided for. The Group felt that the remainder
would be collected post year end as they were with long-standing relationships, and the risk of default is considered to be low
and write-offs due to bad debts are extremely low. The Group has no significant concentration of credit risk, with the exposure
spread over a large number of customers.
The credit risk on liquid funds is low as the counterparts are banks with high credit ratings assigned by international credit
rating bodies. The majority of the Company’s cash holdings are held at NatWest Bank which has a BBB+ credit rating.
The carrying value of both financial assets and liabilities approximates to fair value.
Capital policy
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide
optimal returns for shareholders and to maintain an efficient capital structure to reduce the cost of capital.
In doing so the Group’s strategy is to maintain a capital structure commensurate with a strong credit rating and to retain
appropriate levels of liquidity headroom to ensure financial stability and flexibility. To achieve this, the Group monitors key credit
metrics, risk and fixed charge cover to maintain this position. In addition, the Group ensures a combination of appropriate short-
term and long-term liquidity headroom.
During the year the Group had a short-term loan balance of £nil (2019: £nil) and amounts payable over one year are nil (2019:
£nil). The Group had a strong cash reserve to utilise for any short-term capital requirements that were needed by the Group.
The Group has continued to look for a further long-term investments or acquisitions and therefore, to maintain or re-align the
capital structure, the Group may adjust when dividends are paid to shareholders, return capital to shareholders, issue new
shares or borrow from lenders.
Annual Report 2019/2020
77
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
24. Deferred tax
As at 1 July
IFRS 15 adjustment
Current year provision
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
Losses
30.6.20
£’000
1,377
–
792
2,169
30.6.20
£’000
169
53
2,473
(457)
–
(69)
30.6.19
£’000
1,697
(539)
219
1,377
30.6.19
£’000
264
65
1,919
(332)
(539)
–
2,169
1,377
Deferred tax provision relates to taxes to be levied by the same authority on the same entity expected to be settled at the
same time. As such deferred tax assets and liabilities have been offset.
25. Capital commitments
The Company and Group have no capital commitments as at the year end.
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:
Sale of services
Cadence Performance
Entity under common directorship
Email marketing services
Cloudcall Group Plc
Entity under common directorship
Email marketing services
Epwin Group Plc
Entity under common directorship
Email marketing services
Year end balances arising from sale of services
Cloudcall Group Plc
Entity under common directorship
Email marketing services
Epwin Group Plc
Entity under common directorship
Email marketing services
Directors
Aggregate emoluments
Company contributions to money purchase pension scheme
Share-based payments from the LTIP options granted
Directors’ pay summary does not include Non-Executive Directors.
30.6.20
£’000
30.6.19
£’000
–
–
4
4
–
1
1
30.6.20
£’000
774
25
438
1,237
2
12
–
14
1
–
1
30.6.19
£’000
835
21
389
1,245
78
dotdigital Group Plc
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
30.6.20
£’000
440
17
16
289
762
30.6.19
£’000
435
12
13
289
749
30.6.20
£’000
30.6.19
£’000
651
651
651
651
The receivables and payables are unrestricted in nature and bear no interest. No provisions are held against receivables from
related parties.
Loans to/from related parties
dotdigital EMEA Limited
Subsidiary
As at 1 July
Loans advanced
Loans repaid
30.6.20
£’000
30.6.19
£’000
(4,580)
3,060
(2,025)
(3,545)
(2,559)
51
(2,072)
(4,580)
IAS 24 allows disclosure exemption of transactions between wholly-owned subsidiaries that are eliminated on consolidation.
27. Ultimate controlling party
There is no ultimate controlling party of the Group. dotdigital Group Plc acts as the Parent Company to dotdigital EMEA Limited,
dotdigital Inc, dotdigital APAC Pty Limited, dotdigital B.V., dotmailer Developments Limited, dotmailer SA Pty, dotmailer LLC,
dotdigital SG Pte. Limited, Dynmark International Ltd and Dynmark S.p. z.o.o.
28. Share-based payment transactions
The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted after
7 November 2002. The expense recognised for share-based payment made during the year is £682,000 (2019: £565,000).
Vesting conditions of the options dictate that employees must remain in the employment of the Group for the whole period
to qualify.
Movement in issued share options during the year
The table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during the
period. The options outstanding at 30 June 2020 had a WAEP of 51.09p (2019: 49.16p) and a weighted average contracted life
of 3.01 years (2019: 3.66 years) and their exercise prices ranged from 0.5p to 68.50p. All share options are settled in form of
equity issued.
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
30.06.20
30.6.19
No. of options
4,428,064
WAEP
49.16p
No. of options
3,732,262
-
-
(517,080)
3,910,984
230,985
0p
0p
34.57p
51.09p
68.50p
2,305,000
(1,609,198)
–
4,428,064
748,065
WAEP
9.43p
50p
50p
0p
49.16p
45.05p
Annual Report 2019/2020
79
FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 June 2020
28. Share-based payment transactions continued
The weighted average share price at the date of the exercise for share options exercised during the period was 92p (2019: £nil).
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
19 December
2017
1,375,000
77.50p
85.95p
0.50p
5 years
1.23%
30%
1%
0.50p
5 years
1.33%
30%
1%
20 June
2017
230,985
68.50p
68.50p
5 years
1.33%
30%
1%
52.70p
65.03p
12.04p
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
30.6.20
£’000
11,808
–
4,148
1,548
16
4
–
61
(3)
–
682
–
100
18,364
(1,157)
(1,300)
15,907
(restated)
30.6.19
£’000
30.6.20
£’000
30.6.19
£’000
8,873
42
3,358
465
344
12
(2,837)
–
–
–
565
(19)
–
10,803
811
879
12,493
2,001
(849)
–
–
–
–
–
–
–
–
5
682
–
–
2,688
11
(1,077)
1,622
–
–
–
–
–
–
–
–
–
565
–
–
(284)
74
2,061
1,851
Current
Profit before tax from all operations
Currency revaluation
Amortisation
Depreciation
Exceptional costs
Finance lease non-cash movement
IFRS 15 reclassification
IFRS 16 restatement
Gain on disposal of fixed assets
Loss on disposal of investments
Share-based payments
Finance income
Finance expense
(Increase)/decrease in trade receivables
Increase in trade payables
Cash generated from operations
80
dotdigital Group Plc
30. Group cash and cash equivalents
The amounts disclosed in the statement of cash flow in respect of cash and cash equivalents are in respect of these statements
of financial position amounts:
As at 1 July 2018
As at 30 June 2019
As at 30 June 2020
Group
£’000
15,005
19,320
25,383
Company
£’000
646
594
396
31. Project development
During the year the Group incurred £6,461,313 (2019: £5,507,539) in development investments.
All resources utilised in development have been capitalised as outlined in the accounting policy governing this area.
32. Events after the end of the reporting period
There are no events after the end of the reporting period which impact the Group’s and Company’s financial statements.
Annual Report 2019/2020
81
FINANCIAL STATEMENTS
Company information
For the year ended 30 June 2020
Directors:
P Amin
B Huard
M O’Leary
M Patel
E Richards
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
88 Wood Street
London
EC2V 7QR
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
82
dotdigital Group Plc
dotdigital Group Plc
Our clients
EMEA Head Office
London
No.1 London Bridge
London
SE1 9BG
United Kingdom
Americas Head Office
New York
333 7th Avenue
Floor 18
New York
NY 10001
USA
APAC Head Office
Sydney
Level 4
213 Clarence Street
Sydney, 2000
Australia