dotDigital Group Regulatory News (DOTD)

dotDigital Group plc

("dotDigital" or the "Group")

Services Division Update

dotDigital Group Plc (AIM:DOTD), the leading provider of services based upon intuitive 'Email Marketing - Software as a Service' ("SaaS Products") to digital marketing professionals, announces that following completion of a thorough review of the Group's Services Division, dotAgency, the Board has decided that the best course of action is to gradually wind down activity within this division whilst continuing to service its existing clients for the duration of their agreements.

Following a formal process, the Group considered various options including several indicative offers in cash for the division. The Board, however, believes that it can achieve greater value for shareholders and the best service for its clients by running off its existing contracts within the Services Division. This course of action is expected to be net cash flow positive to the Group. Importantly there will be no material impact on earnings beyond the IFRS3 adjustments to the goodwill originally attributed to the purchase of Netcallidus. Details of the IFRS3 position were detailed in the Interim Results for the six months ended 31 December 2012 that were published on 26 February 2013.

Peter Simmonds, Chief Executive, commented:

"Following market changes, in particular the changes made by Google™ to their search engine algorithms, it has become increasingly difficult, without making significant investment, to profitably cross-sell SEO services in line with the Group's original strategy, particularly to the Group's smaller SME clients. Whilst good progress had been made in growing our ecommerce capabilities there were few synergies between that business and the core email marketing business. It is if course disappointing to have to make this decision, but we also feel that this represents a significant opportunity by freeing up resources and management time to fully concentrate on our strategy of continuing to grow our core Email Marketing SaaS products offering which grew 39% from the same six month period in the prior year.

We were pleased with the level of interest shown by third parties in acquiring dotAgency, which reflects the efforts of the highly talented team, but having weighed up the costs and benefits of each option, we felt that shareholders, remaining staff and customers would get the best outcome from working out the contract book. We expect to have fully exited the business of our Services Division in around 18 months having generated net positive cash flow to the Group. The core SaaS business continues to perform very strongly and we are optimistic about the outlook for the year."

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