dotDigital Group Regulatory News (DOTD)

FOR IMMEDIATE RELEASE 15 JULY 2014

dotDigital Group Plc

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

TRADING UPDATE

Year Ended 30 June 2014

A year of further strong organic growth

dotDigital Group Plc (AIM:DOTD), the leading provider of intuitive Software as a Service ("SaaS") and managed services to digital marketing professionals, provides a trading update for the year-ended 30 June 2014, ahead of its full year results which are expected to be announced mid-October. 

The Board is extremely pleased with the Company's performance and now anticipates that full year EBITDA will be slightly ahead of the current market forecast of £4.3m. This performance is a result of continued strong organic growth in the high margin and long-term recurring revenues generated by our core email marketing product, dotMailer.

Financial Highlights

Within the core products division, revenues for the 12 month period grew by 32% compared to the same period in 2013, resulting in closing cash at the end of the period of £9.3m (2013: £6.1m).

A summary of revenues by division for the full year to 30 June 2014 is provided below:

* In March 2013 the Board announced its plans to wind down the Group's Search Marketing and Web Design Division, 'dotAgency', whilst continuing to service its existing clients for the remaining duration of their agreements. These agreements are now coming to an end culminating in the successful closure of this division.

dotMailer: Email Marketing and Marketing Automation Software - SaaS Products

Revenue performance was driven by strong growth of 32% across the core high margin email marketing SaaS side of the business, ahead of plan.

This strong organic growth was underpinned by a combination of successful new client wins, particularly in the corporate and mid-market sector, growth in recurring revenue from existing clients and improved client retention through having a larger proportion of clients under contracts of 12-36 months. Notable client wins during the year included Land Securities Group, Thorntons, Ladbrokes International, Children with Cancer and National Express Bus.

Revenues from the US region performed strongly increasing from $456k to $1.4m, an increase of over 200% compared to the same period in 2013. 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. A good illustration of this strategy is 'Wine Enthusiast', the world's leading source for wine accessories, storage and gifts, being one of the largest and most recent client wins to date.

Penetration into Latin America has also materialised in the form of working with Panama's COPA Airlines, the third largest carrier in South America, demonstrating how the dotMailer platform is travelling from our US base into Central America and beyond. The pipeline continues to grow with continued prudent investment in headcount and marketing activities to capitalise on this extremely exciting territory.

The Email Creative and Managed Services offering (part of the wider dotMailer Division) has had a very strong performance with an increase in revenue of 138% to £1.9m over the comparable period. We are confident that continued revenue growth can be unlocked from these new services by generating return on investment (ROI) for our clients and helping time poor marketeers to outsource their creative and campaign management/strategy to email marketing experts such as dotDigital.

Magento Connector

dotDigital fully launched the Magento connector earlier in the year allowing ecommerce customers that use the Magento platform to synchronise their data between the dotMailer and Magento platforms. The client take up of the new Magento connector has been strong with the average monthly recurring revenue spend for customers of over £700 per month. The product has been well received as evidenced by feedback gained from both clients and Magento implementation partners. Over 100 clients are now using this platform with most recent wins including 7dayshop.com, Heals, Trunki and Fuji Film in the UK.

The US Region has also demonstrated how invaluable the Magento relationship has become over a short period of time with 14 new clients won since the beginning of the year. Vizio, one of the largest consumer electronics companies in the US and listed in the top ten biggest brands in the world using Magento, is one of the most recent additions for dotDigital. New Magento Partners in the US also include, Blue acorn, Pod1, Classy llama, SLI Systems, Celebros and Peer1.

A clear endorsement of the success of the Magento relationship was recently demonstrated when dotDigital was awarded 'Gold Partnership Status' by Magento, only one in four email service providers in the world to have been granted this prestigious award. Marketing efforts have also been continuous with dotDigital sponsoring Magento's premier eCommerce 'Imagine 2014' event held in Las Vegas earlier this year and this week's 'MagentoLive' event in London.

Cash Generation

The business continues to be highly cash generative with cash at the end of the period standing at £9.3m, an increase of 52% on the prior year (2013: £6.1m) after capital expenditure and product development of £1.9m. The Company continues to be debt finance free. Highly efficient cash collection processes combined with over 45% of clients paying retainers by direct debit, contributed to the Company's strong balance sheet at the year end.

dotMailer: Re-branding : 15th Anniversary Network Party and New Office Opening

dotDigital has successfully concluded a dotMailer re-branding initiative which incorporates a refresh of the dotMailer platform, release of powerful new features and the launch of a new Marketing website. This platform and new website has gone live today on www.dotmailer.com.

dotDigital is also celebrating its 15 year anniversary and to commemorate this auspicious landmark the Company is tonight hosting a "15th Birthday Network Party" for clients, partners and institutional investors. This evening's event is being held at dotDigital's new offices at 1 London Bridge.

Strategy Update

Our strategy of continued investment in the organic growth of the core email marketing business is delivering pleasing results.

The focus on fast growing medium sized businesses and corporate clients has driven average monthly spend per client up by 35%. This combined with a focus on longer term contracts, (87% of clients are now on 12-18 month contracts), and client retention, is importantly leading to significantly higher client lifetime values.

Outlook

The 'dotMailer' email marketing/marketing automation platform continues to perform very strongly.

The strategy to focus on larger clients with higher lifetime values and lower attrition has demonstrably contributed to higher services revenues, higher average monthly contract values and higher retention.

The marketing initiatives to build our US presence are now starting to deliver a strong pipeline of new clients particularly in the mid-size online retail space which is a core focus for 2014/15.

As part of the rebranding initiative some significant new big data/marketing automation features have been added to the dotMailer platform which the Board believes will open up new sales opportunities and provide enhanced revenue opportunities from existing clients.

Demand for email marketing and marketing automation continues to be strong both in the UK and internationally and the Board believes that the dotMailer platform is well placed to continue to generate strong organic growth in revenues over the coming year.

Commenting on the trading update, dotDigital's Chief Executive Officer, Peter Simmonds said: "This strong performance is again extremely encouraging and illustrates that our organic growth strategy is working. We look forward to providing a full update on the year's trading together with greater detail on our future growth plans when we announce our full year results in October. I would like to take the opportunity to thank our staff for their tremendous enthusiasm, commitment and performance over the past year and our shareholders for their continued support."

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