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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Dotdigital Group Plc | LSE:DOTD | London | Ordinary Share | GB00B3W40C23 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.40 | -0.42% | 94.10 | 94.10 | 95.80 | 94.10 | 94.10 | 94.10 | 6,370 | 08:03:40 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Related Svcs, Nec | 69.23M | 12.6M | 0.0412 | 22.96 | 289.34M |
TIDMDOTD
RNS Number : 7527T
dotDigital Group plc
17 October 2017
FOR IMMEDIATE RELEASE 17 OCTOBER 2017
Analyst meeting today: 9.30am start - at dotdigital's offices, No.1 London Bridge, SE1
Please call Lisa Baderoon on 07721 413 496 if you would like to attend or email: lisa.baderoon@dotmailer.com
dotdigital Group Plc
("dotdigital", "Company" or the "Group")
FINAL RESULTS
For the twelve months ended 30 June 2017
"A successful, dynamic year, driven by exciting global expansion"
dotdigital Group Plc (AIM:DOTD), the leading provider of intuitive software as a service ("SaaS") and managed services to digital marketing professionals, through the 'dotmailer' platform, announces its results for the twelve months ended 30 June 2017. The twelve months' key highlights include:
Financial growth
-- Revenue up 19% to GBP32.0m from GBP26.9m -- H2 growth up 21% compared to H1 17% growth -- EBITDA of GBP10.1m, up 26% from GBP8.0m -- Profit before tax up 30% to GBP8.1m from GBP6.2m -- Net assets up 21% to GBP28.6m from GBP23.7m -- Earnings per share has increased by 32% to 2.42 pence from 1.83 pence
-- Strong cash generation from operations of GBP8.8m with net cash position of GBP20.4m up 18% as at 30 June 2017
Announced today: The Board proposes a regular dividend of 0.55 pence per ordinary share; payable at the end of January 2018 - see separate announcement
Operational momentum
Hot Features
Premium
-- Average Revenue Per User ('ARPU') of GBP715, up 24% from GBP575
-- Overall volume of messages sent out increased by 38% to 11.9bn from 8.6bn
-- Revenues outside of the core UK grew by 48% and represent 23% of group revenues
-- Over 550 new clients signed in the period including BetFred, CNBC, ICAEW, Fannie May, Jack Wills, Superdry, The Premier League
-- Completion of migration to global cloud platform -- New e-Commerce connectors which has doubled the addressable market -- Milan Patel appointed as permanent Chief Executive Officer -- Phillip Blundell appointed to the Board as Interim Chief Financial Officer (post year-end)
Outlook
-- Board remains confident on achieving the stated ambitious plans for the next 12 months -- Evidenced by Q1 progress in line with plan and acceleration in international sales
-- Strategic partnerships continue to be productive with a further strengthening of relationships and pipeline building with our e-Commerce connectors
-- With this solid foundation the Board has a bigger focus on building an acquisition pipeline
Commenting on current trading and outlook, Milan Patel, CEO said:
"H2 progress has accelerated to bring substantial and commendable growth across all regions. The first few months of the new financial year have started well and in line with plan. There has been an increase in the customer numbers that are being added across all regions to the platform compared to the previous year. The market outlook remains strong which puts us in a good position to capitalise on our strategy and the Board remains confident about achieving our ambitious growth plans."
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
For further enquiries please contact:
dotdigital Group Plc Tel: 020 8662 2777
Milan Patel, CEO
Phillip Blundell, CFO
Financial PR and Investor Relations Tel: 07721 413 496
Lisa Baderoon
Lisa.Baderoon@dotmailer.com
--------------------------------
N+1 Singer (Nominated Adviser and Tel: 020 7496 3000
Joint Broker)
Shaun Dobson, Head of Corporate
Finance
Liz Yong, Corporate Finance
--------------------------------
finnCap (Joint Broker) Tel: 020 7220 0500
Stuart Andrews, Corporate Finance
Rhys Williams, Sales
--------------------------------
dotdigital's Annual Report will shortly be available on its website: www.dotdigitalgroup.com
DOTDIGITAL GROUP PLC
CHAIRMAN'S REPORT
FOR THE YEARED 30 JUNE 2017
Introduction
In a year defined by transformation, the Group has again delivered an impressive financial result, achieving revenue growth of 19% to GBP32.0m, a profit of GBP8.1m and cash generation from operations of GBP8.8m. This leaves the business in a very strong cash position with over GBP20m in the bank.
The year began with the appointment of Milan Patel as our permanent Chief Executive Officer ("CEO"). Milan has orchestrated significant operational change during the years, leading to excellent financial results and positioning the business for substantial future growth.
This reorganisation sees a focus on 3 key strategic initiatives to deliver exceptional operational performance: geographical expansion, product innovation and wider strategic partnerships with global businesses. The first has seen the scaling up of dedicated offices in Australia, focused on both the Australian and Asia Pacific regions. This expansion is built on a business model of selling through partners into the fast-growing e-commerce market. The US office has been strengthened with a sales support function to facilitate this e-commerce focus. Product innovation has been expanded and is integral to the business' core culture.
Our software development team now comprises of 9 groups working with Agile methodologies to deliver three substantial product releases per annum, in recognition of the market trend towards automation and personalisation. Partnerships are key to the company's data-driven future; the business has accelerated the development of rich functional integrations for e-commerce and CRM platforms, developing strategic partnerships and expanding our addressable market.
Operations
On the operational side, a reorganisation has taken place to support customers' present and future needs. This means prioritising ease of interaction, pricing models that maximise customer ROI and greater support structures to assist customer success. The business' expansion has also allowed Milan to promote several rising stars from within the business into roles with added responsibility and influence over the Group's future direction. These individuals will further support the company's customer focus. I would like to thank Milan and his team for their fantastic contribution in a year of transition; they have built a strong platform for continued above-trend growth. I also would like to warmly welcome the 50 new colleagues that have joined us over the past year.
The SaaS industry is undergoing substantial growth and change, with the market expected to double in the next five years. A continued focus on our initiatives provides a solid foundation for growth. Data from Grand View suggests that the marketing automation market will grow to $8.6bn billion by 2025, giving us the confidence to continue to build out our multi-channel platform and invest in a world-class business.
This strong market and financial position is represented in the recent appointment of Phillip Blundell to the position of Interim Chief Financial Officer. Phillip will assist in delivering robust organic growth and explore pertinent acquisitions to accelerate the realisation of our key strategic goals.
Outlook
The first few months of the new financial year have started in line with plan. Investment in new connectors and product features is being well received in the market. The Board remains confident in our ability to achieve the ambitious plan for the year and our capacity to integrate potential acquisitions. The Group's transition to a global leader in multi-channel marketing automation will continue, meeting the future needs of marketers and riding the wave of market growth in customer engagement.
Frank Beechinor-Collins
Non-Executive Chairman
16 October 2017
DOTDIGITAL GROUP PLC
CHIEF EXECUTIVE OFFICER'S REPORT AND FINANCIAL REVIEW
FOR THE YEARED 30 JUNE 2017
Operational Review
Revenue performance, which grew organically by 19%, was driven by strong growth from all three of our regional hubs. Our Europe, the Middle East and Africa (EMEA) operation grew by 15% from GBP23.8m to GBP27.3m through a combination of higher value new client wins, an optimised sales process and the ability to continually monetise the advanced feature adoption to existing clients. New customers are also buying more sophistication upfront. This is evidenced by revenues from enhanced functionality-related monthly recurring charges now achieving GBP6.3m, which is an increase of 53%.
We continue to make strong progress within the international markets, with revenues outside of the core UK market growing by 48% and now representing 23% of the group revenues. International expansion remains a core pillar to our organic growth strategy. The Group has added notable clients across its markets both locally and internationally in the B2B and e-commerce sectors such as ICAEW, CNBC, Superdry, Jack Willis, BetFred and The Premier League amongst others.
In addition, we have continued to see our professional services offerings adding value to our customers, with the revenue now representing 10% of group revenues at GBP3.3.
During the year, the Group's Average Revenue Per User rose by 24% to spend levels of circa GBP715 per month. This was a result of continued focus on mid-market, enterprise clients and the Magento connector clients who spend on average of over GBP1,420 per month.
Overall volumes of messages sent out by dotmailer increased by 38% to 11.9bn from 8.6bn, reflecting the change in demographic but also increasing the recurring revenue growth and adding to the increase in Average Revenue Per User to GBP715 per month.
We continued to see strong growth in the UK market. During the year we simplified our sales proposition by introducing value bundles that allow every customer to get the most out of the platform. We optimised the sales incentives to drive both monthly recurring revenues and the number of customers we were bringing onboard. The final change made was to refocus our Account Management strategy, which was previously completely focused on growing clients, to be more customer success-driven. This has resulted in improved customer satisfaction and retention.
Market
The marketing automation market is set to expand from $3.8bn in 2016 to $8.6bn by 2025, which shows a global compounded annual growth rate (CAGR) of approximately 9.8% according to Inkwood Research. Currently Email Marketing Automation represents 30% of the global market, closely followed by other channels such as mobile application marketing and social media marketing. According to the research, email marketing is anticipated to govern the marketing automation market. This is due to the increase adoptions of digitalisation and the channel's status as a relatively low cost but effective marketing method.
The retail segment is anticipated to lead the marketing automation space and supports dotdigital's strategy to continue integrating with e-commerce platforms in order to increase the addressable market in this space.
North America, Europe and Asia will lead with the fastest growth in those markets. The Group currently has 3 separate hubs that mirror these markets, with a scalable infrastructure that has in-region data processing and storage to mirror these growth areas. The Group is therefore well placed to capture market share in those areas.
Geographic progress
North America
The revenue for our North American region grew by 16% to US$5m following successful changes in the period. H2 grew faster at 22% compared to 11% in H1 (in constant currency), which shows early signs of positive results from the improvements made; these included strengthening the management team and structure, enhancing sales proposition, pushing for new partners in the region and building further e-commerce connectors to increase our addressable market. We continue to build a strong pipeline as we move further into the year. Some of the clients currently signed up in the region include Betsy Boo, Fannie May and HouserShoes.com.
Asia Pac
The growth from the APAC region of 112% saw revenues increasing from AUS$0.6m to AUS$1.2m, partly due to introducing a direct sales team which assisted in reducing sales cycles of new customers coming onboard. For customers to receive the best experience in that region we also added support, customer success and marketing teams to increase satisfaction and raise brand awareness. We continue to build strong relationships with our partners in Australia and Asia. We also continue to push further into Singapore, Indonesia, Vietnam and Hong Kong through our partners. Some of the wins we have seen have already include Fairfax Media, Spend-Less Shoes and Vitamin King.
Europe, the Middle East and Africa
With all the changes made in the EMEA region, H2 grew at 18% compared to 13% in H1, a result of improved sales lead optimisation and increased customer satisfaction.
Although still early days, the continued focus in the Nordics and Benelux region has resulted in strong partnerships and a growing number of clients from that region. We also now have a dedicated sales team that sells into the EMEA region as the pipeline builds. Some recent clients wins include Sika Services AG, Essentiel and Le Creuset Group AG.
We are also carrying out a self-service model trial in the South African region to test our propositions as we continue to penetrate further international markets. New markets we will test in the new financial year will be France and Germany where we already have an established client base.
Product innovation
We continue to evolve our technology to be the world's best data-driven marketing automation platform. In the year, we have continued to scale the platform with in-region data processing and storage through cloud infrastructure in Europe, North America and Asia Pac. This expansion has proved to be very successful and puts us in a unique position against our competitors.
There were new connectors added in the year predominantly focused on e-commerce platforms, including Shopify and Shopify Plus, Big Commerce, Woo commerce and Shopware. These premium integrations increase our addressable market in the UK and overseas.
We have added three development teams as part of our continued commitment to accelerate functionality progress. These teams will allow us to build innovative functionality that gives us technology advantages over our competitors. The recurring revenue from our enhanced functionality increased by 53% compared to the previous year and now represents GBP6.3m of our group revenues.
Strategic partnerships
Magento: We continued to invest in the development of the Magento Connector and the Magento partner relationship. The connector is now used by over 460 clients generating annualised recurring revenues of more than GBP6.2m. Though the initial uptake for Magento 2.0 was slower than predicted by Magento, we saw an increase of new customer sign ups using the connector in H2 with a good sales pipeline after Magento released version 2.1. The average revenue per month from Magento customers increased by 6% to GBP1,420.
Shopify: Our integrations with Shopify and ShopifyPlus has proved very popular with e-commerce companies with results outstripping initial predictions quite considerably. As a result we have optimistic predictions for growth from this strategic relationship this next financial year.
Other e-commerce connectors: We have continued to develop relationships with other e-commerce integration partners and will maintain this development as we move into the next financial year.
Salesforce and Microsoft Dynamics: As part of our commitment to our customers in the B2B marketing space we continued to add new functionality and build on our strategic relationships with the system integrators. These connectors are now used by over 440 clients generating annualised recurring revenues of more than GBP4.2m. The average revenue per month from these customers is approximately GBP1,000 per month.
People
We have made numerous changes in the senior management team that look after the day-to-day running of the business, both by adding new members to the leadership team, and promoting from within through our learning and development programme. This has strengthened the foundations in place - from a management bandwidth and skills perspective- as we become larger and more international.
We invested in sales, marketing and product development in the year to continue supporting our product innovation goals, but also allow us to further develop global brand awareness. With the continued success of international markets, we added another 34 people to allow us to provide our customers with a scalable business model and to support overall business growth. We believe our people are crucially important to our business and its future; further investment will be made in the training and development of all our employees.
We also welcome Phillip Blundell as Interim Chief Financial Officer for the business, who is supporting me with the day-to-day responsibilities. Philip brings with him a wealth of experience, both in growing international businesses and implementing an acquisition growth strategy.
Acquisitions
We have been investigating opportunities beyond organic growth. We do have very strict value enhancing criteria to finding strategic acquisitions. The areas we would consider making an acquisition in are:
1) Companies that help us expand into new geographic markets or allows us to grow faster in a market that we operate within;
2) Companies that can allow us to build on our multi-channel capabilities, beginning initially in the mobile and social marketing space and;
3) Companies that can add new functionality (e.g. artificial intelligence) that will add value to our customer base within the mid-and small enterprise market.
Financial review
Revenues
The Group achieved revenue growth of 19% (2016: 26%), which delivered record overall revenues of GBP32.0 million. The quality of the revenue growth is evidenced by recurring revenues increasing to 81%, up from 78% last year. The Group continued to grow internationally with revenues accounting for 23% of the Group's total.
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 will build 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. For the legacy customers who contract on a 'pay as you go', basis revenue is recognised in the month the sends are delivered.
Gross margins
The gross margin for the period was 86%, slightly down on last year due, to the indirect model of selling in our international regions and continued investment in direct marketing to build long-term annuity revenues.
Operating expenses
EBITDA grew by 26% from GBP8.0m to GBP10.1m, part of this growth was due to the improvement in margins from moving the infrastructure into the cloud which now allows the platform to scale globally. Investments that have been made in previous years in product development and sales and marketing are also paying off.
Operating expenses as a percentage of revenues dropped from 65% to 61%, reflecting better staff utilisation and a significant drop in bad debt charge which originally represented less than 3% of revenue.
Balance sheet
There was strong cash management in the year with cash generated from operations of GBP8.8m (2016: GBP8.0m). The cash at the end of the period was standing at GBP20.4m which represents an increase of 18%. The group continues to be debt free and maintains a healthy balance sheet. A combination of highly efficient cash collection process and an incentivisation push to move more customers onto Direct Debit and ACH Collection helped with the year-end position.
Trade receivables have only grown by 16% in the year reflecting revenue growth and good cash management. Overall receivables have grown 26% as a result of a large increase in prepayments due to the move to the hybrid cloud infrastructure.
The Group continues to invest heavily in the software platform to increase functionality around marketing automation and in building connectors to e-commerce and CRM platforms to allow our customers to make the most of their data and provide excellent customer engagement. This continued investment is demonstrated by the increase in product development of GBP2.2m.
Tax
The Group continues to grow its profitability and this feeds into the tax charge, which has increased by 12% to GBP0.9 million. This is an effective tax rate of 10.5%.
EPS
In the year the adjusted EPS increased by 32% to 2.42p (2016: 1.83p) and adjusted diluted EPS has increased to 2.41p (2016: 1.83p). The increase in EPS is driven by the increased profitability and the reduction in the effective tax rate to 10.5% from 14%.
Dividend policy
We are pleased to announce that the Board has conducted its review of its organic business plan for the next three years. This included evaluating the cash needs required for opportunities in organic growth to increase shareholder value and capital expenditure. The Board has decided that it will continue to keep a progressive dividend in line with EBITDA growth. Therefore, subject to approval at the AGM in December 2017, the Board proposes that the Group will pay a final dividend of 0.55 pence per ordinary share; to be payable at the end of January 2018.
Outlook
The first few months of the new financial year have started very well and in line with plan. There has been an increase in the customer numbers across all regions compared to the previous year. As we look forwards we continue to invest in the product to further strengthen our position as an innovator as the platform continues to evolve to be a data-driven multi-channel marketing automation platform with artificial intelligence and machine learning, which empowers our customers to get a return on investment from their digital marketing. The market continues its very strong growth which puts us in an advantageous position to capitalise on our organic growth strategy.
The Group has a strong position in changing markets and the Board remains confident about the future growth prospects, assuming no adverse change in market conditions and delivery against the strategy plan.
Milan Patel Phillip Blundell Chief Executive Officer Interim Chief Financial Officer 16 October 2017 16 October 2017
DOTDIGITAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 JUNE 2017
30.6.17 30.6.16
Notes GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 31,966 26,926
Cost of sales 6 (4,459) (3,395)
--------- ---------
Gross profit 27,507 23,531
Administrative expenses 6 (19,431) (17,367)
--------- ---------
OPERATING PROFIT 8,076 6,164
Finance income 5 15 51
--------- ---------
PROFIT BEFORE INCOME TAX 6 8,091 6,215
Income tax expense 7 (945) (847)
--------- ---------
Profit for the year from continuing operations 7,146 5,368
========= =========
Profit for the year attributable to the owners of the parent 7,146 5,368
========= =========
Earnings per share from continuing operations (pence per share)
Basic 10 2.42 1.83
Diluted 10 2.41 1.83
========= =========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2017
30.6.17 30.6.16
GBP'000 GBP'000
Notes
PROFIT FOR THE YEAR 7,146 5,368
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to profit and loss:
Exchange differences on translating foreign operations (54) 11
-------- --------
Total comprehensive income attributable to:
Owners of the parent 7,092 5,379
======== ========
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Comprehensive income from continuing operations 7,092 5,379
======== ========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2017
30.6.17 30.6.16
GBP'000 GBP'000
Notes
ASSETS
NON-CURRENT ASSETS
Goodwill 11 609 609
Intangible assets 12 4,519 3,684
Property, plant and equipment 13 1,033 1,142
-------- --------
6,161 5,435
-------- --------
CURRENT ASSETS
Trade and other receivables 15 7,847 6,206
Cash and cash equivalents 16 20,428 17,313
-------- --------
28,275 23,519
-------- --------
TOTAL ASSETS 34,436 28,954
======== ========
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital 17 1,481 1,473
Share premium 18 6,290 6,138
Reverse acquisition reserve 18 (4,695) (4,695)
Other reserves 18 305 174
Retranslation reserve 18 (46) 8
Retained earnings 18 25,306 20,611
-------- --------
TOTAL EQUITY 28,641 23,709
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax 22 814 716
-------- --------
CURRENT LIABILITIES
Trade and other payables 19 4,440 4,151
Current tax payable 541 378
-------- --------
4,981 4,529
-------- --------
TOTAL LIABILITIES 5,795 5,245
-------- --------
TOTAL EQUITY & LIABILITIES 34,436 28,954
======== ========
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF FINANCIAL POSITION
30 JUNE 2017
30.6.17 30.6.16
GBP'000 GBP'000
Notes
ASSETS
NON-CURRENT ASSETS
Investments 14 5,187 5,186
-------- --------
5,187 5,186
-------- --------
CURRENT ASSETS
Trade and other receivables 15 4,633 7,102
Cash and cash equivalents 16 591 639
-------- --------
5,224 7,741
-------- --------
TOTAL ASSETS 10,411 12,927
======== ========
EQUITY ATTRIBUTABLE TO THE
OWNERS OF THE PARENT
Called up share capital 17 1,481 1,473
Share premium 18 6,290 6,138
Other reserves 18 305 174
Retained earnings 18 2,239 5,080
-------- --------
TOTAL EQUITY 10,315 12,865
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 19 96 62
TOTAL LIABILITIES 96 62
-------- --------
TOTAL EQUITY & LIABILITIES 10,411 12,927
======== ========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2017
Called Retained Share
up share
capital earnings premium
GBP'000 GBP'000 GBP'000
Balance as at 1 July 2015 1,435 16,297 5,382
Issue of share capital 38 - 756
Dividends - (1,054) -
Share-based payment - - -
---------- ---------- --------
Transactions with owners 38 (1,054) 756
---------- ---------- --------
Profit for the year - 5,368 -
Other comprehensive income - - -
Total comprehensive income - 5,368 -
---------- ---------- --------
Balance as at 30 June
2016 1,473 20,611 6,138
Issue of share capital 8 - 152
Dividends - (2,479) -
Transfer in reserves - 28 -
Share-based payment - - -
---------- ---------- --------
Transactions with owners 8 (2,451) 152
---------- ---------- --------
Profit for the year - 7,146 -
Other comprehensive income - - -
---------- ---------- --------
Total comprehensive income - 7,146 -
---------- ---------- --------
Balance as at 30 June
2017 1,481 25,306 6,290
========== ========== ========
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2017
Reverse Total
Retranslation acquisition Other equity
reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 July
2015 (3) (4,695) (25) 18,391
Issue of share capital - - - 794
Share repurchase - - - -
Dividends - - - (1,054)
Share-based payments - - 199 199
Transactions with owners - - 199 (61)
-------------- ------------- --------- --------
Profit for the year - - - 5,368
Other comprehensive
income 11 - - 11
-------------- ------------- --------- --------
Total comprehensive
income 11 - - 5,379
-------------- ------------- --------- --------
Balance as at 30 June
2016 8 (4,695) 174 23,709
Issue of share capital - - (3) 157
Dividends - - - (2,479)
Transfer in reserves - - (28) -
Share-based payments - - 162 162
Transactions with owners - - 131 (2,160)
-------------- ------------- --------- --------
Profit for the year - - - 7,146
Other comprehensive
income (54) - - (54)
-------------- ------------- --------- --------
Total comprehensive
income (54) - - 7,092
-------------- ------------- --------- --------
Balance as at 30 June
2017 (46) (4,695) 305 28,641
============== ============= ========= ========
-- 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 of the net 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 relates to the charge for the share-based payment in accordance with International Financial Reporting Standard 2 and shares repurchased in the year classified as treasury shares.
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2017
Called Retained Share Other
up share
capital earnings premium Reserves Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1
July 2015 1,435 1,534 5,382 (25) 8,326
Issue of share capital 38 - 756 - 794
Dividends - (1,054) - - (1,054)
Share repurchase - - - - -
Share-based payments - - - 199 199
---------- ---------- -------- --------- -------------
Transactions with
owners 38 (1,054) 756 199 (61)
---------- ---------- -------- --------- -------------
Profit for the year - 4,600 - - 4,600
Total comprehensive
income - 4,600 - - 4,600
---------- ---------- -------- --------- -------------
Balance as at 30
June 2016 1,473 5,080 6,138 174 12,865
Issue of share capital 8 - 152 (3) 157
Dividends - (2,479) - - (2,479)
Transfer in reserves - 28 - (28) -
Share-based payments - - - 162 162
---------- ---------- -------- --------- -------------
Transactions with
owners 8 (2,451) 152 131 (2,160)
---------- ---------- -------- --------- -------------
Profit for the year - (390) - - (390)
Total comprehensive
income - (390) - - (390)
---------- ---------- -------- --------- -------------
Balance as at 30
June 2017 1,481 2,239 6,290 305 10,315
========== ========== ======== ========= =============
-- 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 of the net share issue expenses.
-- Other reserves relates to the charge for the share-based payment in accordance with International Financial Reporting Standard 2. Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2 and shares repurchased in the year classified as treasury shares.
DOTDIGITAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2017
30.6.17 30.6.16
GBP'000 GBP'000
Notes
Cash flows from operating activities
Cash generated from operations 27 8,813 7,997
Tax paid (685) (335)
-------- --------
Net cash generated from operating activities 8,128 7,662
-------- --------
Cash flows from investing activities
Purchase of intangible fixed assets (2,379) (1,570)
Purchase of tangible fixed assets (375) (502)
Sale of tangible fixed assets 48 -
Interest received 15 51
-------- --------
Net cash flows used in investing activities (2,691) (2,021)
-------- --------
Cash flows from financing activates
Equity dividends paid (2,479) (1,054)
Share issue 157 794
Net cash flows (used)/from financing activities (2,322) (260)
-------- --------
Increase in cash and cash equivalents 3,115 5,381
Cash and cash equivalents at beginning of year 28 17,313 11,932
-------- --------
Cash and cash equivalents at end of year 28 20,428 17,313
======== ========
DOTDIGITAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2017
30.6.17 30.6.16
GBP'000 GBP'000
Notes
Cash flows from operating activities
Cash generated from operations 27 2,274 733
-------- --------
2,274 733
-------- --------
Net cash generated from operating activities
Cash flows from financing activates
Equity dividends paid (2,479) (1,054)
Share issue 157 794
Share repurchase - -
-------- --------
Net cash flows (used)/from financing activities (2,322) (260)
-------- --------
Increase in cash and cash equivalents (48) 473
Cash and cash equivalents at beginning of year 28 639 166
-------- --------
Cash and cash equivalents at end of year 28 591 639
======== ========
DOTDIGITAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2017
1. GENERAL INFORMATION
dotdigital Group Plc ("dotdigital") is a company incorporated in England and Wales and quoted on the AIM Market. The address of the registered office is disclosed on the inside back cover of the financial statements.
2. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and those parts of Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.
The Group has applied all accounting standards and interpretations issued by the International Accountancy Standards Board and International Accounting Interpretations Committee effective at the time of preparing the financial statements.
New and amended standards adopted by the Company
There are no IFRSs or IFRIC interpretations that are effective for the first time in the financial year beginning on or after 1 July 2016 that would be expected to have a material impact on the Company.
Standards, interpretations and amendments to published standards that are not yet effective
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2016 and have not been early adopted.
Reference Title Summary Application date of Application date of
standard Group
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IFRS 4 Insurance Contracts Amendments regarding Periods beginning on 1 July 2018
the interaction of or after 1 January
IFRS 4 and IFRS9 2018
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IFRS 15 Revenue from Original issue Periods beginning on 1 July 2018
Contracts with or after 1 January
Customers 2018
Amendments to defer Periods beginning on 1 July 2018
the effective date or after 1 January
2018
Clarifications to Periods beginning on 1 July 2018
IFRS or after 1 January
2018
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IAS 7 Statement of Cash Amendments as a Periods beginning on 1 July 2017
Flows result of the or before 1 January
Disclosure initiative 2017
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IAS 12 Income Taxes Amendments regarding Periods beginning on 1 July 2017
the recognition of or before 1 January
deferred tax for 2017
unrealised losses
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IAS 40 Investment Property Amendments to clarify Periods beginning on 1 July 2018
transfers or property or after 1 January
to, or from, 2018
investment property.
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IFRS 1, IFRS 2, IAS Annual improvements Amendments resulting Annual periods 1 July 2018
28 2014-2016 Cycle beginning on and
after 1 January 2018
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IFRS 16 Leases Original issue Annual periods 1 July 2019
beginning on or after
1 January 2019
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IFRS 9 Financial Instruments Amendments regarding Periods beginning on 1 July 2018
the interaction of or after 1 January
IFRS 4 and IFRS9 2018
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Amendments to IFRS 12 Disclosure of Amendments resulting Annual periods 1 July 2017
interests in other from Annual beginning on or after
entities Improvements 1 January 2017
2014-2016 (Clarifying
Scope)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Amendments to IFRIC Foreign Currency Amendments to clarify Annual periods 1 July 2019
22 transactions and the accounting for beginning on or after
advance consideration transactions that 1 January 2019
include the receipt
or payment
of advance
consideration in a
foreign currency.
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
IFRIC 23 Uncertainty over Address how to Annual periods 1 July 2019
income tax treatment reflect uncertainty beginning on or after
in accounting for 1 January 2019
income tax
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The Directors anticipate that the adoption of these Standards and the Interpretations in future periods will have no material impact on the financial statements of the company. The company does not intend to apply any of these pronouncements early. In regard to IFRS 15, the Board has initiated a project to assess the likely impact ahead of its implementation. The Board does not expect this to have a material impact on the financial statements.
The financial statements are presented in sterling (GBP), rounded to the nearest thousand pound.
Basis of consolidation
In the period ended 2009 the Company acquired via a share for share exchange the entire issued share capital of dotmailer Limited, whose principal activity is that of web and email-based marketing.
Under IFRS 3 'Business combinations' the dotmailer Limited share exchange has been accounted for as a reverse acquisition. Although these consolidated financial statements have been issued in the name of the legal parent, the Company it represents in substance is a continuation of the financial information of the legal subsidiary, dotmailer Limited. The following accounting treatment has been applied in respect of the reverse acquisition:
- The assets and liabilities of the legal subsidiary, dotmailer Limited, are recognised and measured in the consolidated financial statements at their pre-combination carrying amounts, without restatement to their fair value;
- The retained reserves recognised in the consolidated financial statements for the beginning of the prior period reflect the retained reserves of dotmailer Limited to 30 April 2008. However, in accordance with IFRS3 'Business combinations', the equity structure appearing in the consolidated financial statements reflects the equity structure of the legal parent dotdigital Group Plc, including the equity instruments issued under the share exchange to 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.
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.
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 dotmailer Limited.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and 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 web-based marketing services to other businesses and services are either provided on a usage basis or fixed price bespoke contract. Revenue from contracts are 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.
Going concern
The Directors, at the time of approving the financial statements, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the Directors' report.
Operating profit
Operating profit is stated after charging operating expenses but before finance costs.
Dividends
Final dividend distributions to the Company's shareholders are recognised as a liability in the financial statements in the period in which the dividends are approved by the Company's shareholders while interim dividends distributions are recognised in the period in which the dividends are declared and paid.
Goodwill
Goodwill represents the excess of the fair value of the consideration over the fair values of the identifiable net tangible and intangible assets acquired.
Under IFRS 3 "Business Combinations", goodwill arising on acquisitions is not subject to amortisation but is subject to annual impairment testing. Any impairment is recognised immediately in the income statement and not subsequently reversed.
Investments in subsidiaries
Investments are held as non-current assets at cost less any provision for impairment. Where the recoverable amount of the investment is less than the carrying amount, impairment is recognised.
Intangible assets
Intangible assets are recorded as separately identifiable assets and recognised at historical cost less any accumulated amortisation. These assets are amortised over their useful economic lives of four to five years, with the charge included in administrative expenses in the income statement.
Intangible assets are reviewed for impairment annually. Impairment is measured by determining the recoverable amount of an asset or cash generating unit (CGU) which is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU.
- 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. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. 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 assets;
- It can be demonstrated how the intangible asset will generate possible future economic benefits;
- Adequate technical, financial and other resource to complete the development and to use or sell the intangible asset are available; and
- The expenditure attributable to the intangible asset during its development can be reliably measured.
Impairment of non-financial assets (excluding goodwill)
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Property, plant and equipment
Tangible non-current assets are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assets' carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits are associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is provided at the following rates in order to write off each asset over its estimated useful life and is based on the cost of assets less residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Short leasehold: over the term of the lease Fixtures and fittings: 25% on cost Computer equipment: 25% on cost
The assets' residual values and useful economic lives are reviewed and adjusted, if appropriate, at each reporting date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable value.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other (losses) or gains in the income statement.
Capital risk management
The Group manages its capital to ensure it is able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of cash equivalents and equity attributable to the owners of the parent as disclosed in the statement of changes in equity.
Taxation
The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Current tax
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the balance sheet date.
Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary difference will be utilised.
Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income asset is realised or deferred income tax liability is settled.
Operating leases
Rent payable under operating leases is not recognised in the Group's statement of financial position. Such costs are expensed on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total expense, over the term of the lease.
Financial instruments
Financial assets and financial liabilities are recognised on the statement of financial position when an entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the income statement.
- 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.
Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.
At each reporting date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based on the classification of the financial asset.
Loans and receivables (including trade receivables, prepayments, deposits and other receivables, cash and bank balances) are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. At each reporting date subsequent to initial recognition, loans and receivables are carried at amortised cost using the effective interest method, less any identified impairment losses. An impairment loss is recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired, and is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
- 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.
- 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.
The Group's financial liabilities include trade payables and accrued liabilities.
- Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Terms on accounts payable range from 10 to 90 days.
Foreign currency risk
Currency risk is the risk that the holding of foreign currencies will affect the Group's position as a result of a change in foreign currency exchange rates. The Group has no significant foreign currency risk as most of the Group's financial assets and liabilities are denominated in functional currencies of relevant Group entities. Accordingly, no quantitative market risk disclosures or sensitivity analysis for currency risks have been prepared.
The results and nancial position of all the Group entities (none of which has the currency of a hyper-in ationary 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'.
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.
Functional currency translation
- Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (functional currency), which is mainly pounds sterling (GBP) 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.
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 cross-channel marketing automation platform, dotmailer. Internal activities are continually undertaken to enhance and maintain the product in a bid to stay ahead of our competition. Management review the work of developers during the period and make the following judgements:
-Internal work relating to product development is reviewed against IAS 38 criteria and will be capitalised if management feel the criteria have been met.
-Internal work relating to the maintenance of existing products is expensed to the income statement and accounted for in payroll costs.
Estimates and assumptions
(a) Estimated impairment of goodwill
The Directors have carried out a detailed impairment review in respect of goodwill. The Group assesses at each reporting date whether there is an indication that an asset may be impaired, by considering the net present value of discounted cash flow forecasts which have been discounted at 10%. The cash flow projections are based on the assumption that the Group can realise projected sales. A prudent approach has been applied with no residual value being factored
Further details on the estimates and assumptions we make in our annual impairment testing of goodwill are included in note 11 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 26 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 condition 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.
3. SEGMENTAL REPORTING
The Group's single line of business is the provision of web-based marketing services. The chief operating decision-maker considers the Group's only reportable segment to be by geographical location, this being UK, US and rest of the world ("RoW") operations as shown below:
30.6.2017
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UK US RoW Total
GBP'000 GBP'000 GBP'000 GBP'000
Income statement
Revenue 24,743 3,907 3,316 31,966
Gross profits 21,291 3,293 2,923 27,507
Profit before income tax 4,779 1,062 2,250 8,091
Total comprehensive income
attributable to the owners
of the parent 3,929 967 2,250 7,146
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Financial position
Total assets 32,578 1,556 302 34,436
Net current assets 21,961 1,120 213 23,294
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Revenue from external customers is attributed to the geographical segments noted above based on the customers' location. There were no customers who account for more than 10% revenue (2016: none).
30.6.2016
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UK US RoW Total
GBP'000 GBP'000 GBP'000 GBP'000
Income statement
Revenue 22,056 3,022 1,848 26,926
Gross profits 19,298 2,565 1,668 23,531
Profit before income tax 4,244 504 1,467 6,215
Total comprehensive income
attributable to the owners
of the parent 3,398 539 1,442 5,379
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Financial position
Total assets 27,410 1,014 530 28,954
Net current assets 17,791 756 443 18,990
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4. EMPLOYEES AND DIRECTORS
30.6.17 30.6.16
GBP'000 GBP'000
Wages and salaries 11,217 9,667
Social security costs 1,146 1,036
Other pension costs 252 243
----------- -----------
12,615 10,946
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The average monthly number of employees during the year is as follows
30.6.17 30.6.16
Directors 6 7
Sales and Marketing product 120 100
Development and system engineers 56 43
Administration 56 54
----------- -----------
238 204
=========== ===========
During the year the Group also capitalised staff-related costs of GBP2,072,417 (2016: GBP1,338,915) in relation to internally generated development costs.
5. NET FINANCE INCOME
30.6.17 30.6.16
GBP'000 GBP'000
Finance income:
Deposit account interest 15 51
-------- --------
15 51
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6. OPERATING PROFIT
Costs by nature
Profit from continuing operations has been arrived after charging/(crediting):-
30.6.17 30.6.16
GBP'000 GBP'000
Direct marketing 2,073 1,984
Outsourcing 186 172
Other costs 2,200 1,239
--------- --------
Total cost of sales 4,459 3,395
========= ========
30.6.17 30.6.16
GBP'000 GBP'000
Staff related costs (inc Directors emoluments) - note 4 12,615 10,946
Operating leases: Land and buildings 954 865
Operating lease: Other 43 48
Audit remuneration 40 37
Amortisation of intangibles 1,544 1,330
Depreciation charge 494 450
Legal, professional and consultancy fees 424 289
Computer expenditure 1,809 1,236
Bad debts 8 801
Foreign exchange (gains)/losses (21) (246)
Travelling 425 471
Office running 158 174
Other costs 938 966
--------- --------
Total administration costs 19,431 17,367
========= ========
During the year the Group obtained the following services from the Group's auditor at costs detailed below:
30.6.17 30.6.16
GBP'000 GBP'000
Fees payable to the Company's auditor for the audit of Parent Company and consolidated
financial
statements 8 8
Fees payable to the Company's auditor for other services 28 25
* audit of Company subsidiaries
* non-audit fees: Tax and review of interim accounts 4 4
-------- --------
40 37
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7. INCOME TAX EXPENSE
Analysis of the tax charge from continuing operations:
30.6.17 30.6.16
GBP'000 GBP'000
Current tax on profits for the year 847 514
Deferred tax on origination and reversal of timing differences 98 333
-------- --------
945 847
Factors affecting the tax charge:
30.6.17 30.6.16
GBP'000 GBP'000
Profit on ordinary activities before tax 8,091 6,215
======== ========
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK
of 19.75% (2016: 20.75%) 1,598 1,243
Effects of:
Expenses not deductible 12 164
Research and development enhanced claim (1,004) (670)
Expenditure permitted on exercising options (141) (465)
Overseas tax (profits)/losses 64 (15)
Capital allowances in excess of depreciation 318 257
-------- --------
Total income tax 847 514
======== ========
Deferred tax was calculated using the rate 19.75% (2016: 19.75%). For further details on deferred tax see note 22.
8. PROFIT/(LOSS) OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent Company is not presented as part of these financial statements. The parent Company's loss before exceptional items for the financial year was GBP390,345 (2016: profit: GBP4,601,353)
9. DIVIDS
Amounts recognised as distributions to equity holders in the period
30.6.17 30.6.16
GBP'000 GBP'000
Paid dividend for year end 30 June 2017 of 0.857p (2016: 0.357p) per share 2,449 1,054
======== ========
Proposed dividend for the year end 30 June 2017 of 0.55p (2016: 0.84p) per share 1,629 2,476
======== ========
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. The 0.55p
is a general dividend (2016: the 0.84p is broken down between a general dividend of 0.43p
and a special dividend of 0.41p).
10. 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.
Reconciliations are as follows:-
30.6.17
-----------------------------------
Weighted
average Per share
From continuing operations Earnings number Amount
of
GBP'000 shares Pence
Basic EPS
Profit for the year attributable
to the owners of the parent 7,146 295,457,101 2.42
Options and warrants - 1,061,738 -
--------- ------------ ----------
Diluted EPS
Profit for the year attributable
to the owners of the parent 7,146 296,518,839 2.41
========= ============ ==========
30.6.16
-----------------------------------
Weighted
average Per share
From continuing operations Earnings number Amount
of
GBP'000 shares Pence
Basic EPS
Profit for the year attributable
to the owners of the parent 5,368 293,095,257 1.83
Options and Warrants - 977,555 -
--------- ------------ ----------
Diluted EPS
Profit for the year attributable
to the owners of the parent 5,368 294,072,812 1.83
========= ============ ==========
Weighted average number of shares
30.6.17 30.6.16
Shares Shares
Basic EPS 295,457,101 293,095,257
============ ============
Diluted EPS 296,518,859 294,072,812
============ ============
11. GOODWILL
Group
30.6.17 30.6.16
COST GBP'000 GBP'000
At 1 July
At 30 June 4,121 4,121
-------- --------
AMORTISATION
At 1 July 3,512 3,512
Impairment - -
-------- --------
At 30 June 3,512 3,512
-------- --------
NET BOOK VALUE 609 609
======== ========
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 wholly to the Group's single trading activity and business segment. This has been tested for impairment during the current financial year by comparison with the recoverable amounts of the CGU.
Recoverable amounts for CGUs are based on the higher of value in use and fair value less costs to sell. The recoverable amounts of the CGU have been determined from value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. The key assumptions for the value in use calculations are those regarding discount rates, growth rates, and expected changes in margins. Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the CGUs. Changes in income and expenditure are based on past experience and expectations of the future changes in the market. The pre-tax discount rate used to calculate the value in use is 10% (2016: 10%). The valuations indicate sufficient headroom such that a reasonably possible change in key assumptions would not result in impairment of goodwill.
12. INTANGIBLE ASSETS
Group
Computer Internally Domain
generated
development
software costs names Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2016 362 8,107 16 8,485
Additions 135 2,244 - 2,379
---------- ------------- -------- --------
At 30 June 2017 497 10,351 16 10,864
---------- ------------- -------- --------
AMORTISATION
At 1 July 2016 264 4,521 16 4,801
Amortisation for the year 56 1,488 - 1,544
---------- ------------- -------- --------
At 30 June 2017 320 6,009 16 6,345
---------- ------------- -------- --------
NET BOOK VALUE
At 30 June 2017 177 4,342 - 4,519
========== ============= ======== ========
Computer Internally Domain
generated
development
software costs names Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2015 274 6,625 16 6,915
Additions 88 1,482 - 1,570
---------- ------------- -------- --------
At 30 June 2016 362 8,107 16 8,485
---------- ------------- -------- --------
AMORTISATION
At 1 July 2015 228 3,227 16 3,471
Amortisation for the year 36 1,294 - 1,330
---------- ------------- -------- --------
At 30 June 2016 264 4,521 16 4,801
---------- ------------- -------- --------
NET BOOK VALUE
At 30 June 2016 98 3,586 - 3,684
========== ============= ======== ========
Development cost additions represents resources the Group have 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.
13. PROPERTY, PLANT AND EQUIPMENT
Group
Short Fixtures Computer
&
leasehold fittings equipment Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2016 444 448 1,760 2,652
Additions 55 86 234 375
Disposals - - (601) (601)
At 30 June 2017 499 534 1,393 2,426
---------- --------- ---------- --------
DEPRECIATION
At 1 July 2016 147 293 1,070 1,510
Depreciation for the
year 67 86 341 494
Eliminated on disposal - (611) (611)
At 30 June 2017 214 379 800 1,393
---------- --------- ---------- --------
NET BOOK VALUE
At 30 June 2017 285 155 593 1,033
========== ========= ========== ========
Short Fixtures Computer
&
leasehold fittings equipment Totals
GBP'000 GBP'000 GBP'000 GBP'000
COST
At 1 July 2015 395 401 1,354 2,150
Additions 49 47 406 502
At 30 June 2016 444 448 1,760 2,652
---------- --------- ---------- --------
DEPRECIATION
At 1 July 2015 95 203 755 1,053
Depreciation for the
year 52 90 315 457
At 30 June 2016 147 293 1,070 1,510
---------- --------- ---------- --------
NET BOOK VALUE
At 30 June 2016 297 155 690 1,142
========== ========= ========== ========
14. INVESTMENTS
Company
Shares in Shares in
Group Group
undertakings undertakings
30.6.17 30.6.16
COST GBP'000 GBP'000
At 1 July 2016 8,705 8,705
Additions 1 -
At 30 June 2017 8,706 8,705
AMORTISATION
At 1 July and 30 June 3,519 3,519
NET BOOK VALUE
At 30 June 5,187 5,186
============= =============
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 Class of share Proportion of
voting power
held %:
dotmailer Limited Web and email-based Ordinary 100
marketing Ordinary A 100
dotsurvey Limited Dormant Ordinary 100
dotsearch Europe Limited Branch company Ordinary 100
dotcommerce Limited Dormant Ordinary 100
doteditor Limited Dormant Ordinary 100
dotSEO Limited Dormant Ordinary 100
dotagency Limited Dormant Ordinary 100
dotmailer Inc Web and email- based Ordinary 100
marketing
dotmailer Pty Limited Web and email- based Ordinary 100
marketing
Dotmailer Development Ltd Holding company Ordinary 100
Dotmailer SA Pty Development hub Ordinary 100
Dotmailer LLC Development hub Ordinary 100
All of the above subsidiaries have been included within the consolidated results. All the above companies with the exception of dotmailer Inc, Dotmailer SA Pty, Dotmailer LLC and dotmailer Pty Limited were incorporated in England and Wales. dotmailer Inc was incorporated in Delaware (US), dotmailer Pty Limited was incorporated in New South Wales (Australia), Dotmailer SA Pty was incorporated in South Africa and Dotmailer LLC was incorporated in the Republic of Belarus.
15. TRADE AND OTHER RECEIVABLES
Group Company
30.6.17 30.6.16 30.6.17 30.6.16
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Trade receivables 6,425 5,559 - -
Less: Provision for impairment
of trade receivables (502) (824) - -
-------- -------- -------- --------
Trade receivables - net 5,923 4,735 - -
Other receivables 111 137 - -
Amounts owed by Group
undertakings - - 4,609 7,080
VAT - - 14 9
Prepayments and accrued
income 1,813 1,334 10 13
-------- -------- -------- --------
7,847 6,206 4,633 7,102
======== ======== ======== ========
Further details on the above can be found in note 21.
Included within prepayments is an amount of GBP621,065 (2016: GBP271,680) in relation to deferred commission which is considered to be long-term.
16. CASH AND CASH EQUIVALENTS
Group Company
30.6.17 30.6.16 30.6.17 30.6.16
GBP'000 GBP'000 GBP'000 GBP'000
Bank accounts 20,428 17,313 591 639
20,428 17,313 591 639
======== ======== ======== ========
Further details on the above can be found in note 21.
17. CALLED UP SHARE CAPITAL
Allotted, issued, Nominal 30.6.17 30.6.16
fully paid
number value GBP'000 GBP'000
296,238,485 (2016:
294,784,789) GBP0.005 1,481 1,473
-------- --------
1,481 1,473
======== ========
During the reporting period the Company undertook the following transactions involving the issuing and reclassifying of issued share capital:
On 16 November 2016 a number of employees exercised their share options increasing the issued share capital by 788,696 shares at a premium price of 0p.
On 28 February 2017 a number of employees exercised their share options increasing the issued share capital by 525,000 shares at a premium price of 28.5p.
On 28 June 2017 a number of employees exercised their share options increasing the issued share capital by 140,000 shares at a premium price of 50p.
18. RESERVES
Group
Reverse
Retained Share acquisition
earnings premium reserve
GBP'000 GBP'000 GBP'000
As at 1 July 2016 20,611 6,138 (4,695)
Issue of share capital - 152 -
Dividends (2,479) - -
Profit for the year 7,146 - -
Transfer of reserves 28 - -
Other comprehensive income: - - -
Currency translation
Share-based payment - - -
--------- -------- -------------
Balance as at 30 June 2017 25,306 6,290 (4,695)
========= ======== =============
Retranslation Other
Reserve reserves Totals
GBP'000 GBP'000 GBP'000
As at 1 July 2016 8 174 22,236
Issue of share capital - (3) 149
Dividends - - (2,479)
Profit for the year - - 7,146
Transfer of reserves - (28) -
Other comprehensive income:
Currency translation (54) - (54)
Share-based payment - 162 162
-------------- --------- --------
Balance as at 30 June 2017 (46) 305 27,160
============== ========= ========
Group
Reverse
Retained Share acquisition
earnings premium reserve
GBP'000 GBP'000 GBP'000
As at 1 July 2015 16,297 5,382 (4,695)
Issue of share capital - 756 -
Dividends (1,054) - -
Profit for the year 5,368 - -
Other comprehensive income: - - -
Currency translation
Share-based payment - - -
--------- -------- -------------
Balance as at 30 June 2016 20,611 6,138 (4,695)
========= ======== =============
Retranslation Other
reserve reserves Totals
GBP'000 GBP'000 GBP'000
As at 1 July 2015 (3) (25) 16,956
Issue of share capital - - 756
Share repurchase - - -
Dividends - - (1,054)
Profit for the year - - 5,368
Currency translation 11 - 11
Share-based payment - 199 199
-------------- --------- --------
Balance as at 30 June 2016 8 174 22,236
============== ========= ========
Company
Retained Share Other
earnings premium Reserves Totals
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2016 5,080 6,138 174 11,392
Issue of share capital - 152 (3) 149
Dividends (2,479) - - (2,479)
Profit for the year (390) - - (390)
Transfer of reserves 28 - (28) -
Share-based payment - - 162 162
--------- -------- --------- --------
At 30 June 2017 2,239 6,290 305 8,834
========= ======== ========= ========
Company
Retained Share Other
earnings premium Reserves Totals
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2015 1,534 5,382 (25) 6,891
Issue of share capital - 756 - 756
Dividends (1,054) - - (1,054)
Profit for the year 4,600 - - 4,600
Share-based payment - - 199 199
--------- -------- --------- --------
At 30 June 2016 5,080 6,138 174 11,392
========= ======== ========= ========
19. TRADE AND OTHER PAYABLES
Group Company
30.6.17 30.6.16 30.6.17 30.6.16
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Trade payables 1,194 1,351 52 11
Amounts owed to Group
undertakings - - - 4
Social security and
other taxes 415 571 - -
Other payables 32 222 - 1
VAT 830 710 - -
Accruals and deferred
income 1,969 1,297 44 46
4,440 4,151 96 62
======== ======== ======== ========
Further details on liquidity and interest rate risk can be found in note 21.
20. LEASING AGREEMENTS
Minimum lease payments under non-cancellable operating leases fall due as follows:
30.6.17
Land &
Buildings Others Totals
GBP'000 GBP'000 GBP'000
Within one year 591 27 618
Between two to five years 3,024 7 3,031
---------- -------- --------
3,615 34 3,649
========== ======== ========
30.6.16
Land &
Buildings Others Totals
GBP'000 GBP'000 GBP'000
Within one year 374 46 420
Between two to five years 1,118 39 1,157
---------- -------- --------
1,492 85 1,577
========== ======== ========
Operating leases represent rents payable by the Group for its office properties. Leases are negotiated for an average term of five years and rentals are fixed on an average of two years with the option to extend for a further five years at the prevailing market rate at the time.
21. 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 listed in this note. It's 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:
Group Company
30.6.17 30.6.16 30.6.17 30.6.16
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Trade and other receivables 7,847 6,206 24 22
Bank balances 20,428 17,313 591 639
28,275 23,519 615 661
======== ======== ======== ========
Financial liabilities
Trade payables 1,194 1,351 52 11
Accrued liabilities
and other payables 3,246 2,800 44 47
4,440 4,151 96 58
====== ====== === ===
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 monthly 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 Groups 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 GBP2,056,000 (2016: GBP2,283,000) are expected to mature in less than a year.
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 2016 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:
30.6.17 30.6.16
GBP'000 GBP'000
0-30 days 4,845 2,795
30-60 days 67 1,243
More than
60 days 1,513 1,521
6,425 5,559
======== ========
The maturity of the Group's provision for impairment is as follows:
30.6.17 30.6.16
GBP'000 GBP'000
0-30 days 8 6
30-60 days 8 87
More than
60 days 486 731
502 824
======== ========
The movement in the provision for the impairment is as follows:
30.06.17 30.6.16
GBP'000 GBP'000
As at 1 July 824 343
Provision for impairment 82 789
Receivable written off
in the year (65) (259)
Unused amount reversed (339) (49)
---------
As at 30 June 502 824
========= ========
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 GBP1,581,391 (2016: GBP1,541,197) of which GBP460,837 (2016: GBP730,350) 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 GBPnil (2016: GBPnil) and amounts payable over one year are nil (2016: GBPnil). 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.
22. DEFERRED TAX
30.6.17 30.6.16
GBP'000 GBP'000
As at 1 July 716 383
Current year provision 98 333
814 716
======== ========
The deferred tax liability above comprises the following temporary differences:
30.6.17 30.6.16
GBP'000 GBP'000
Capital allowances in excess of depreciation 113 91
R&D relief in excess of amortisation 858 708
Share option relief (157) (83)
814 716
======== ========
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.
23. CAPITAL COMMITMENTS
The Company and Group have no capital commitments as at the year end.
24. RELATED PARTY DISCLOSURES
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Group
The following transactions were carried out with related parties
30.6.17 30.6.16
GBP'000 GBP'000
Sale of services
Email
Entity under marketing
Cadence Performance common directorship services 2 2
2 2
======== ========
Directors
30.6.17 30.6.16
GBP'000 GBP'000
Aggregate emoluments 558 858
Ex-gratia payment - 137
Company contributions to money purchase
pension scheme 50 46
Share-based payments - 114
608 1,155
======== ========
Information in relation to the highest paid Director is as follows:
30.6.17 30.6.16
GBP'000 GBP'000
Salaries 372 183
Ex-gratia payment - 137
Other benefits 10 3
Pension costs 25 -
Share-based payments - 114
407 437
======== ========
Company
The following transactions were carried out with related parties
30.06.17 30.06.16
GBP'000 GBP'000
Year end balances
arising from sales/purchase
of services
dotmailer Limited Subsidiary Payables (5,338) (5,338)
(5,338) (5,338)
========= =========
The receivables and payables are unrestricted in nature and bear no interest. No provisions are held against receivables from related parties.
Loans to related parties
30.6.17 30.6.16
GBP'000 GBP'000
dotmailer Limited Subsidiary
As at 1 July 12,417 6,388
Loans advanced 40 6,069
Loans repaid (2,507) (40)
9,950 12,417
======== ========
25. ULTIMATE CONTROLLING PARTY
There is no ultimate controlling party of the Group. dotdigital Group PLC acts as the parent Company to dotmailer Limited, dotsearch Europe Limited, dotmailer Inc, dotmailer Pty Limited, dotagency Limited (Dormant), dotsurvey Limited (Dormant), dotSEO Limited (Dormant), dotcommerce Limited (Dormant), doteditor Limited (Dormant) dotmailer Developments Limited, dotmailer SA Pty and dotmailer LLC.
26. 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 GBP162,000 (2016: GBP199,600).
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 2017 had a WAEP of 33.35p (2016: 26.69p) and a weighted average contracted life of 2.67 years (2016: 3.2 years) and their exercise prices ranged from 13p to 68.50p. All share options are settled in form of equity issued.
30.06.17 30.6.16
No of options WAEP No of options WAEP
Outstanding at the
beginning of the
period 4,104,029 26.69p 10,938,790 14.83p
Granted during the
year 230,985 68.50p 1,439,029 29.02p
Forfeited/cancelled
during the period 706,460 35.30p 491,066 21.46p
Exchanged for shares 1,088,409 694.91p 7,782,724 10.22p
-------------- --------- -------------- -------
Outstanding at the
end of the period 2,540,145 33.35p 4,104,029 26.69p
-------------- --------- -------------- -------
Exercisable at the
end of the period 500,000 15.63p 1,063,409 8.00p
The weighted average share price at the date of the exercise for share options exercised during the period was 694.91p (2016: 40.32p).
20 25 November 28 November 18 October
June 2015 2014 2013
2017
Number of options
granted 230,985 809,160 1,525,000 3,554,794
Share price at
grant date 68.50p 40.50p 29.00p 17.82p
Exercise price 68.50p 40.25p 28.50p 18.25p
Option life in 5 years 5 years 5 years 5 years
years
Risk free rate 1.33% 1.33% 1.35% 1.40%
Expected volatility 30% 30% 30% 30%
Expected dividend
yield 1% 0% 0.% 0.4%
Fair value of 12.04p 6.46p 5.33p 3.31p
options/warrants
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.
27. GROUP RECONCILIATION OF PROFIT BEFORE CORPORATION TAX TO CASH GENERATED FROM OPERATIONS
Group Company
30.6.17 30.6.16 30.6.17 30.6.16
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Profit before tax from
all operations 8,091 6,215 (390) 4,600
Currency revaluation (54) 11 - -
Depreciation 2,038 1,787 - -
Gain on disposal of fixed (58) - - -
assets
Share-based payments 162 199 162 199
Finance income (15) (51) - -
-------- -------- -------- --------
10,164 8,161 (228) 4,799
(Increase)/decrease in
trade receivables (1,641) (878) 2,469 (3,978)
Increase/(decrease) in
trade payables 290 714 33 (88)
-------- -------- -------- --------
Cash generated from operations 8,813 7,997 2,274 733
======== ======== ======== ========
28. 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:
Group Company
GBP'000 GBP'000
As at 1 July 2015 11,932 166
======== ========
As at 30 June 2016 17,313 639
======== ========
As at 30 June 2017 20,428 591
======== ========
29. PROJECT DEVELOPMENT
During the period the Group incurred GBP2,243,687 (2016: GBP1,428,558) in development investments. All resources utilised in development have been capitalised as outlined in the accounting policy governing this area.
30. POST BALANCE SHEET EVENTS
There are no post balance sheet events which impact the Group's financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FFUEFMFWSESS
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October 17, 2017 02:00 ET (06:00 GMT)
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