dotDigital Group Regulatory News (DOTD)

An analyst meeting will be held at 09.30am today at the offices of N+1 Singer, One Bartholomew Lane, EC2N 2AX

Enquiries, please contact Lisa Baderoon (lisa.baderoon@dotdigitalgroup.co.uk)

dotDigital Group Plc

("dotDigital", "Company" or the "Group")

INTERIM RESULTS ANNOUNCEMENT

For the six months ended 31 December 2013

"Continued strong organic growth in line with forecast"

dotDigital Group Plc (AIM:DOTD), the UK's leading provider of intuitive email marketing and marketing automation software and managed services to digital marketing professionals, announces its results for the six months ended 31 December 2013.

Six Month Key Highlights

· Revenues from continuing operations up 32.5% to £7.6m from £5.7m

· Monthly recurring revenues from dotMailer's Software as a Service ("SaaS") based usage charges up 29% to £5.8m

· Email related creative and managed service up 164% to £0.8m

· Group operating profit before tax and exceptionals up 17.8 % to £2.1m

· Net cash generated from operating activities of £2.0m

· Strong net cash position of £7.3m as at 31st December 2013

dotMailer

· 426 new clients signed in the period including Skanska, Santander, GFK, Fujifilm, Harley Davidson, Metapack and Fraser Hart

· Average monthly recurring spend per client increased from £238 to £284

Magento connector

· Over 75 clients on the newly launched Magento connector

· Average recurring spend from clients of £700 per month

International Initiatives

· Revenue from the US region grew from $88k to $456k reflecting good initial progress

On outlook, Peter Simmonds, Chief Executive said:

"I am delighted that the strategy of focusing on fast growing medium sized businesses and corporate clients has driven average monthly spend up by 19%. This combined with a focus on longer term contracts and client retention is leading to significantly higher client lifetime values.

The initiatives to accelerate organic growth that we announced in August 2013 are already starting to deliver increased sales although as a Software as a Service business with monthly recurring revenues, the full impact will not be seen in our results until future periods.

Based on the strong performance at the half year to 31 December 2013 and the forward pipeline, the Board remains confident of achieving both revenue and profit expectations for 2014 and of delivering long term shareholder value."

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CHIEF EXECUTIVE REVIEW

Overview

As announced in the trading update on 8 January 2014, dotDigital continued to deliver strong growth in both revenues and profits in line with market forecasts for the six months ended 31 December 2013.

The table above shows the performance in the core business division under the brand dotMailer and the trailing revenue of circa £30k per month from the discontinued 'Services' operation (Web Design and Search marketing) that was announced in the full year accounts ending 30 June 2013. As the ecommerce clients re-platform their websites this revenue line will continue to reduce over the next 12 - 24 months.

dotMailer: Email Marketing & Marketing Automation Software - SaaS Products

The performance from the high margin SaaS product based email marketing platform continues to go from strength to strength with revenue growth for the six month period of 32.5% to £7.6m (2012: £5.7m) with strong recurring revenue continuing to form a significant part of this total. Profit before tax grew by 17.4% to £2.6m and reflects the ongoing investment the Company is making in the business in order to accelerate future organic growth.

This strong growth was helped by the focus on winning higher value clients, as well as growth in recurring spend from existing clients and improved client retention driven by clients signing up to longer term contracts. The average monthly billing from all clients increased by 19% from £238 per month to £284. Following the strategy to focus on high value corporates and mid-sized clients, the monthly commitment from new clients increased by 36%. In the interim period 426 new clients were signed with an average monthly committed spend of £295. Client numbers were lower than the corresponding period last year reflecting the Company's strategy to focus on fast growing mid-size businesses and enterprise clients with a significantly higher lifetime value. The average monthly commitment in the pipeline suggests that this will trend upwards. Notable client wins included Harley Davidson, Metapack, OFGEM, Fraser Hart, Payzone, Skanska, GFK, Santander, Fujifilm and Fruit of the Loom.

With the Board's strategy of continued investment in the business to capitalise on long term organic growth, an additional 24 people in Sales and Account management have been recruited. The addition of this headcount has already started to pay off generating £200k of incremental revenue since the start of the investment program in August 2013. Further investment will continue to be made in marketing of the dotMailer platform and adding further revenue generating personnel. At the half year end, dotMailer had committed to £1.2m of annualised spend in sales, account management and marketing salaries.

Revenues from the US region have started well increasing from $88k to $456k, a five-fold increase compared to the same period in 2012. The New York sales office continues to focus on sector niches and higher value corporate clients that it has identified which are the most attractive for the dotMailer product platform. The pipeline is continuing to grow with prudent additional investment in headcount and marketing activities.

Our email creative and managed services revenue more than doubled from £0.3m to £0.7m during the period. There is further revenue growth potential that can be unlocked from these new services. This offering helps generate positive return on investment (ROI) for our clients and helps time poor marketers to outsource their creative and campaign management/strategy to email marketing experts.

New SaaS products

The Company has launched two new additions to its core email marketing automation platform. It has now fully launched the Magento connector, which will allow ecommerce customers that use the Magento platform to synchronise their data between the two platforms. This will also enable customers to segment their data and send targeted campaigns to prospects and customers. Some recent client users include Heals, World Duty Free, Vax and Paperchase.

The first half of the year also saw the beta launch of the customer insight module, which allows a customer to build complex, behavioural based customer segments for hyper personalisation in minutes using dotMailer's drag and drop query building technology. This allows our customers to send relevant and targeted content to recipients delivering significant email marketing ROI. The Company expects to launch this to the full user base in March 2014.

Financial Summary

Consolidated EBITDA

Overall group EBITDA rose from £2.2m to £2.6m, an increase of 18%, reflecting the strong performance in the core products division.

Balance Sheet & Cash Position

The Company continues with its strong cash generation from operations with the interim end net cash balance growing to £7.3m after capital expenditure of £0.1m, hardware/software upgrades of £0.2m and research and product development of £0.6m. This has also been partly due to further efficiencies in the cash collection process and a decrease in debtor turnover ratio. The Company also continues not to have any debt finance. These highly efficient internal accounting practices contributed to the Company having an even stronger balance sheet at the six months end.

Dividend Policy

A maiden dividend of 0.1p per ordinary share was proposed by the Company at the time of the annual results in October last year demonstrating a clear commitment from the Board to delivering value by focusing on total shareholder return in the future. This dividend was approved by shareholders at the Annual General Meeting on the 17 December 2013 and paid on 31 January 2014. The Company's ongoing policy will be to review dividends at the time of the year end. The Board is therefore not proposing an interim dividend.

Current Trading & Outlook

The core email marketing business continues to perform strongly and the strategy to continue to invest in the business is delivering pleasing results. 

The client take up of the new Magento product has been strong with the average monthly spend of new customers increasing to over £700 per month. The product has been well received as evidenced by feedback gained from both clients and Magento implementation partners.

Whilst the International revenues are still at an early stage we have confidence from existing prospects and the pipeline that has been built up in the US. Our analysis shows that we have more potential customers with larger email databases in the US which should translate into greater client by client revenue values/spends. With continued good hiring and carefully managed investment we are confident of revenues from the US region building over the next 12 months.

I am delighted that the strategy of focusing on fast growing medium sized businesses and corporate clients has driven average monthly spend up by 19%. This combined with a focus on longer term contracts and client retention is leading to significantly higher client lifetime values.

The initiatives to accelerate organic growth that we announced in August 2013 are already starting to deliver increased sales although as a Software as a Service business with monthly recurring revenues, the full impact will not be seen in our results until future periods.

Based on the strong performance at the half year to 31 December 2013 and the forward pipeline, the Board remains confident of achieving both revenue and profit expectations for 2014 and of delivering long term shareholder value.

DOTDIGITAL

CONSOLIDATED INCOME STATEMENT

For the six months ended 31 December 2013

DOTDIGITAL

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2013

DOTDIGITAL

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONFor the six months ended 31 December 2013

DOTDIGITAL

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the six months ended 31 December 2013

DOTDIGITAL

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 December 2013

· Share capital is the amount subscribed for shares at nominal value

· Share premium represents the excess of the amount subscribed for share capital over the nominal value net of the share issue expenses

· Retained earnings represents the cumulative earnings of the Group attributable to equity shareholders.

· The reverse acquisition reserve relates to the adjustment required to account the reverse acquisition inaccordance with International Financial Reporting Standards

· Other reserves relate to the charge for the share based payments in accordance with International Financial Reporting Standard 2

· Retranslation reserve relates to the retranslation of a foreign subsidiary into the functional currency of the Group

DOTDIGITAL

CONSOLIDATED STATEMENT OF CASHFLOWS

For the six months ended 31 December 2013

DOTDIGITAL

NOTES TO THE FINANCIAL STATEMENTSFor the six months ended 31 December 2013

DOTDIGITAL

NOTES TO THE INTERIM FINANCIAL STATEMENTS

For the six months ended 31 December 2013