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DOTD Dotdigital Group Plc

86.00
0.80 (0.94%)
28 Mar 2024 - Closed
Delayed by 15 minutes
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
  0.80 0.94% 86.00 84.90 86.10 87.50 84.90 85.00 590,765 16:35:11
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Computer Related Svcs, Nec 69.23M 12.6M 0.0412 20.66 260.28M

dotDigital Group plc Preliminary Results (1163E)

16/10/2018 7:00am

UK Regulatory


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TIDMDOTD

RNS Number : 1163E

dotDigital Group plc

16 October 2018

dotdigital Group plc

("dotdigital" or the "Group")

Preliminary results

dotdigital Group plc (AIM: DOTD), a leading omnichannel marketing automation platform, announces preliminary results for the year ended 30 June 2018 with strong growth in revenue and profit driven by the Group's organic growth strategy and the addition of omni-channel functionality.

Highlights

   --     Group revenues grew 35% to GBP43.1m (2017: GBP32.0m) 
   --     Adjusted EBITDA(1) grew 21% to GBP12.5m (2017: GBP10.3m) 
   --     Adjusted operating profit(2) grew 22% to GBP10.0m (2017: GBP8.2m) 
   --     Strong cash balance at period end of GBP15.0m (2017: GBP20.4m) 

o Includes the acquisition and funding of Comapi for GBP11.5m (GBP10.7m acquisition cost)

   --     Comapi omni-channel acquisition fully integrated and performing in line with expectations 
   --     ARPU(3) grew 18%, increasing from GBP715 per month to GBP845 per month 
   --     Customers signed in the period increased 26% to 689 (2017: 548) 
   --     Strong momentum in Q4 from contracted monthly recurring revenues 

Product innovation

   --     Recurring revenue increased 41% driven by enhanced product functionality 
   --     Comapi omni-channel functionality integrated into Dotmailer 
   --     Three substantial product releases, with focus on automation and personalisation 
   --     Accelerated investment in AI and machine learning 

Strategic partnerships

   --     Magento partnership shows strong growth with ARPU increasing 7% to GBP1,512 per month 
   --     Expanding relationships with Shopify, BigCommerce and Shopware enhancing ecommerce 
   --     Microsoft Dynamics integration delivers 42% ARPU growth to GBP1,405 per month 

"Magento's policy is to work with best in class on-point solutions - of which our premier partners are shining examples of this. Our customers are, and will always be, free to use whatever add-on technology they determine best matches their requirement." Mark Lavelle, CEO of Magento Commerce

Geographic expansion

-- EMEA revenue grew 11% (excluding Comapi) to GBP27.3m (2017: GBP30.4m) despite impact of GDPR. Sales cycles normalised post GDPR implementation (25 May 2018)

-- USA revenue grew 43% (excluding Comapi) to $7.1m (2017: $5.0m) following a strong focus on strengthening the Group's channel management team

-- APAC revenue growth of 85% (excluding Comapi) to AUS$2.1m (2017: AUS$1.2m) due to relationships with channel partners and increased direct sales client conversion rates

Milan Patel, CEO of dotdigital, commented:

"We have continued to deliver on our three strategic pillars, expanding our geographic footprint and increasing our addressable market through integrations built into our strategic partnerships.

The addition of Comapi expands our functionality significantly through the addition of omni-channel, driving innovation in a dynamic business environment impacted in 2018 by significant regulatory change.

With continued investment in our platform and people, we are in a strong position to identify and deliver upon further opportunities for long term growth.

The transition towards becoming an AI-driven, omni channel platform continues to gather pace, better placing dotdigital to capitalise on the opportunity of a global market for marketing automation technology and customer engagement.

We remain focussed on delivering against our strategy and are confident for the year ahead."

For more information, please contact:

 
 dotdigital Group Plc                        Tel: 020 3953 4445 
  Milan Patel, CEO 
  Paraag Amin, CFO 
 FTI Consulting (Financial PR and Investor   Tel: 020 3727 1000 
  Relations) 
  Matt Dixon 
  Adam Davidson 
 N+1 Singer (Nominated Adviser and Joint     Tel: 020 7496 3000 
  Broker) 
  Shaun Dobson, Head of Corporate Finance 
  Rachel Hayes, Corporate Broking 
  Alex Bond, Corporate Finance 
 finnCap (Joint Broker)                      Tel: 020 7220 0500 
  Stuart Andrews, Corporate Finance 
  Rhys Williams, Sales 
  Camille Gochez, Equity Capital Markets 
  Alice Lane, Equity Capital Markets 
 

Prior to this announcement's release, the statement contained inside information for the purposes of Article 7 of Regulation (EU) 596/2014 (MAR) (Market Abuse Regulation).

1. EBITDA is earnings before interest, tax, depreciation and amortisation and adjusted for acquisition costs and share-based payments

   2.        Operating profit is adjusted for acquisition costs and share-based payments 
   3.        ARPU means Average Revenue Per User 

Operational Review

Total revenue in the year grew by 35% to GBP43.1m, of which organic revenue growth was 15% and the remainder as a result of the Comapi acquisition, which contributed GBP6.2m for a period of seven and a half months, from mid-November 2017. We saw double-digit growth in the EMEA region (excluding Comapi) of 11%, from GBP27.3m to GBP30.4m, despite regulatory change in the European market. This growth was also helped through a combination of higher value new client wins, an increase in the number of new customers (we saw a 26% increase in new customers signed up), our ability to continually monetise advanced features alongside the additional marketing channels adopted by existing clients. This is evident by revenues from enhanced functionality and licence fees monthly recurring charges now achieving GBP8.9m, which is an increase of 41%.

We have seen substantial progress in the international markets, with revenues outside of the core UK market (excluding the Comapi acquisition) growing by 33% and now represent 26% of the Group's revenues. International expansion remains a core pillar in our organic growth strategy. The Group has added notable clients across its market both locally and internationally.

In addition, we have continued to see strong growth from a professional service offering (excluding Comapi) which is adding value to our customers, with the revenues growing 24% to GBP4.1m.

During the year, dotmailer's average revenue per user rose by 18% from GBP715 per month to GBP845 per month. This was the result of continued focus on mid-market, enterprise clients and customers that use the Magento integration spending on average over GBP1,500 per month. dotmailer saw an increase of 26% in new customers signing up which represents circa. 680 clients. Overall volume of messages sent out by dotmailer increased by 21% to 14.4bn from 11.9bn, reflecting the change in demographic but also increasing the recurring revenue growth and adding to the increasing ARPU. The other area adding to the expansion is the new channels that are being sold following the integration of Comapi.

We saw double-digit growth from the UK market, which was slightly impacted by regulation change. GDPR caused slight delays in monthly message revenue coming through following sign-up to the Dotmailer platform, whilst customers got ready for their own compliance in the necessary departments that needed to get involved to validate the technology chosen (typically legal and IT). As we went past the implementation date in May, we have seen sales cycles normalising. In the year, we have also refocused on a customer success strategy that is even more attentive and value focused. This has resulted in improved customer satisfaction and retention.

Market

The marketing automation market is set to expand from GBP8.8bn in 2017 to GBP19.3bn by 2023, which shows a global compound annual growth rate (CAGR) of approximately 14%, according to Forrester 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 increased 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 this 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 across those markets. The Group currently has three separate hubs that mirror these markets, with a user interface translated into multiple languages and 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

Revenue in our North American region accelerated. It grew by 43% to $7.1m following the successful changes and investment through the period. Changes that were made in the period were to strengthen the channel management team and increase the number of people within the region to support our customers. The e-commerce connectors that have been built and enhanced in the year has also helped expand the addressable market in the region. We continue to invest in the region with the opening of the West Coast office that will allow closer client and partner interaction in the region and continue to build a strong pipeline in the market.

APAC

Growth from the APAC region of 85% (excluding Comapi) saw revenues increasing from AUS$1.2m to AUS$2.1m, partly due to the continuous relationships with the channel partners and the increase in conversion of prospects to clients by our direct sales team. For the best customer experience in APAC, we continue to invest in our support, customer success and the sales teams. Strong relationships are building in Far East Asia to help raise brand awareness and thought leadership. Early signs are good with the introduction of our omni-channel strategy, with Asia being heavily focused on mobile marketing.

EMEA

EMEA saw revenue growth of 11% (excluding Comapi) from GBP27.3m to GBP30.4m. We still see strong double-digit growth from the region. EMEA revenue were slightly impacted in the first half of the financial year by delays, in customer spending, ahead of GDPR implementation. As anticipated, the region's sales cycles have normalised post GDPR. The region saw an increase in the number of customers signed up following the changes made in the training and development programme for the sales and customer success teams.

The continued focus on the Nordics and Benelux region has resulted in stronger partnerships and growing revenue stream in the region. With the early success in the market, we continue to add to the dedicated channel managers and sales teams that sell into the EMEA market as the pipeline builds. We have started to test the German market with employees in-region as our partnership with Shopware strengthens. Shopware is the largest e-commerce platform in Germany for mid-market clients. We continue to develop stronger partnerships with system integrators and raise brand awareness in that market.

During the period, we withdrew the self-service offering from the South African market and some of the early learnings we took from the test was that the platform was well placed to serve the needs of mid-market and enterprise clients which will only transact with us through the direct sales team in the EMEA region.

Product innovation

We continue to invest in research and development of our technology, aiming to be the world's best data-driven marketing and customer engagement platform. In the year we've continued to scale the platform across all regions. The acquisition of Comapi that was completed in November 2017 has accelerated the platform development with new omni-channel features being integrated into the platform for upsell opportunities to existing customers and attracting more marketeers that are sophisticated in the digital marketing strategies. The move into omni-channel, although early days, has proved to be successful and puts us in a unique position against our competitors.

There were many enhancements made to connectors with the introduction of a Salesforce Commerce Cloud and Shopware solutions. With the premium integrations that we have built into e-commerce platforms, this now allows us to address at least 50% of midmarket e-commerce merchants globally.

As part of a continued commitment to accelerating functionality progress, we continue to add globally to our development teams. These teams will allow us to continue innovating our technology which will give us a stronger competitive advantage. Next year will also see an acceleration in development within the artificial intelligence and machine learning space. We have released significant features that take us into this space. The data science team has also been added to our product development teams. The recurring revenues from our enhanced functionality increased by 41% (excluding Comapi) compared to the previous year and now represent GBP8.9m of the Group's revenues.

Strategic partnerships

Magento: We continue to enhance the connector to make it easy for our customers to attribute better ROI from their digital marketing campaigns from the value proposition we provide. We have continued to deepen our relationship with the release of Magento bundling in November 2017, where the platform ships with the core codebase to their customers using Magento version 2.2 or newer. Magento was recently acquired by Adobe and, after speaking to their senior executives, we are pleased to report that it is business as usual with our partnership. The connector is now used by over 670 clients and generating annualised recurring revenues of more than GBP9.2m. We continue to see strong pipelines building and good level of take-up from the Magento customer base. The average revenue per month from Magento customers increased by 7% to GBP1,512 per month.

Shopify: The Shopify connector now serves over 40 clients. We continue to add new functionality that helps the retailer build out their digital marketing strategies. Average monthly recurring revenues from these clients is GBP1,032 per month. The pipeline and partnership continue to build, and we feel optimistic in growth from this partnership in the next financial year.

Big Commerce: It is still early days with the Big Commerce connector which we continue to enhance. dotmailer has been named as the first European-based Elite partner which will help in endorsing our connector. Both companies continue to work on the go to market strategies and promotion of the dotmailer platform to their e-commerce merchants.

Other e-commerce connectors: We have continued to develop relationships with the likes of Shopware and Salesforce Commerce cloud including adding new e-commerce integration partners globally. We will maintain this development as we move into the next financial year.

As part of our commitment to our B2B marketing customers, we added new functionality and continue to build our relationships with Microsoft for our integration into Microsoft Dynamics CRM and Salesforce. These connectors are now used by over 503 clients and generate annualised recurring revenues of more than GBP6m. As there is more value being put in data by our customers for personalisation and targeting we see a good upsell opportunity and attracting more integrated clients. We have seen our significant growth in ARPUs from the Dynamics connector clients increasing 42% to GBP1,405 per month.

People

We have continued to strengthen and develop 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.

We invested in sales, customer success, 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 41 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.

The Group also welcomed Paraag Amin as Chief Financial Officer in February 2018, and to help support Milan in day-to-day responsibilities. Paraag brings a wealth of experience in financial and operational analysis and comes with broad experience in the industry and public markets. He also has experience across several departments through the business he founded.

Acquisitions

In the year, we completed the acquisition of Comapi, which was a business focused on omni-channel messaging and cloud communications market for a cash consideration of GBP10.7m (which includes the payment of loans in Comapi), with a potential consideration of GBP1.2m in share options for the management team dependent on them achieving specific performance targets over a two-year post acquisition and remaining with the business. The acquisition will:

-- Extend dotdigital's marketing automation platform to provide an industry-leading solution offering fully integrated omni-channel and conversational commerce support to marketers,

-- Enable dotdigital to deliver aligned conversational messaging across channels including email, mobile push, SMS, Facebook messenger, Apple business messenger, Twitter and live chat

-- Enable dotdigital customers to meet consumer demand for a more personalised communication experience and

-- Position dotdigital as the most advanced platform on the market and make dotdigital more relevant in the strategic mobile-first Asian market.

We continue to investigate opportunities beyond organic growth. We do have very strict value-enhancing criteria to finding strategic acquisitions. The areas in which we would consider making an acquisition are:

1) Companies that can help us expand into new geographic markets or allow us to grow faster in a market that we currently 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 bring 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 35% (15% excluding Comapi; 2017: 19%), which delivered record overall revenues of GBP43.1m. The quality of the revenue growth is evidenced by stable recurring revenues of 85%. The Group continued to grow internationally with revenues accounting for 22% of the Group's total (26% excluding Comapi). Comapi contributed GBP6.2m of revenue in the seven and half months that it has been part of the Group.

Business model

The Group generates the majority of its revenues from annual message plans which are recognised equally over the life of the contract. In addition, we sell upgrade packages to customers allowing them to use additional modules and features of our platform. For more sophisticated customers we offer customised functionality and integrations so that they can maximise the use of their customer data. These professional services contracts are recognised as revenue as the work is performed.

Gross margins

The gross margin for the period was 79%, impacted by the consolidation of Comapi (87% excluding Comapi; 2017: 86%). We continue to see value in both the direct and indirect models of selling in our international regions, and hence continue to invest in building long-term annuity revenues.

Operating expenses

Adjusted EBITDA grew by 22% from GBP10.3m to GBP12.5m. Part of this growth was due to the improvement in margins from moving the infrastructure into the cloud last year and hence seeing the full benefit this year. 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 61% to 56%, reflecting the growth in revenue. dotdigital continues to invest in people in the areas of development, sales and marketing, particularly within the regional offices, to continue enhancing and adding to the product suite.

Balance sheet

There was strong cash management in the year with cash generated from operations of GBP13.1m (2017: GBP8.8m). The cash at the end of the period was standing at GBP15.0m (2017: GBP20.4m), despite the acquisition of Comapi for a cash consideration of GBP10.7m. The Group continues to be debt free and maintains a healthy balance sheet. A combination of a highly efficient cash collection process and an incentivisation push to move more customers onto Direct Debit and automated credit card collection helped with the year-end position.

Trade receivables have only grown by 12% (excluding Comapi) in the year reflecting revenue growth and good cash management. Overall receivables have grown 40% (excluding Comapi) as a result of a large increase in prepayments due to the move to the hybrid cloud infrastructure and deferred commission.

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 GBP2.1m.

Goodwill

GBP9.1m of Goodwill reflects the acquisition of Comapi in the year, for a cash consideration of GBP10.7m. Identifiable intangible assets included GBP1.2m of technology and GBP1.2m of customer relationships which will be amortised over 10 and 9 years respectively.

Tax

The Group continues to grow its profitability; however this is not reflected within the tax charge, which is now GBP0.7m with an effective tax rate of 2.8%, the reason being enhanced R&D tax credits and favourable movement in share-based payments.

EPS

In the year the adjusted basic EPS increased by 28% to 3.16p (2017: 2.47p) and adjusted diluted EPS has increased to 3.12p (2017: 2.46p). The increase in adjusted EPS is driven by the increased profitability and the reduction in the effective tax rate to 2.8% from 10.5%.

Dividend policy

As announced last year, the Board conducted its review of its organic business plan for the following three years. This included evaluating the cash needs required for opportunities in organic growth to increase shareholder value and capital expenditure. The Board decided that it will continue to keep a progressive dividend in line with EBITDA growth. Therefore, subject to approval at the AGM in December 2018, the Board proposes that the Group will pay a final dividend of 0.64 pence per ordinary share (2017: 0.55p); to be payable at the end of January 2019.

Outlook

The first few months of the new financial year have started very well and in line with our plan. There has been an increase in the customer numbers across all regions compared to the previous year. As we look ahead we continue to invest in both our people and the product, to further strengthen our position as an innovator as the platform continues to evolve to be a data-driven, omni-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 that there is no adverse change in market conditions and delivery against the planned strategy.

 
 Milan Patel                Paraag Amin 
  Chief Executive Officer    Chief Financial Officer 
  15 October 2018            15 October 2018 
 

DOTDIGITAL GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEARED 30 JUNE 2018

 
 
 
 
                                                                                  30.6.18    30.6.17 
                                                                                  GBP'000    GBP'000 
                                                                        Notes 
 CONTINUING OPERATIONS 
 Revenue                                                                           43,094     31,966 
 Cost of sales                                                            7       (9,074)    (4,459) 
                                                                                ---------  --------- 
 
 Gross profit                                                                      34,020     27,507 
 
 Administrative expenses                                                  7      (23,979)   (19,269) 
 Share based payments                                                               (450)      (162) 
 Exceptional costs                                                        5         (357)          - 
                                                                                ---------  --------- 
 
 OPERATING PROFIT                                                                   9,234      8,076 
 
 Finance income                                                           6             9         15 
                                                                                ---------  --------- 
 
 PROFIT BEFORE INCOME TAX                                                 7         9,243      8,091 
 
 Income tax expense                                                       8         (685)      (945) 
                                                                                ---------  --------- 
 
 Profit for the year from continuing operations                                     8,558      7,146 
                                                                                =========  ========= 
 
  Profit for the year attributable to the owners of the parent                      8,558      7,146 
                                                                                =========  ========= 
 
 Earnings per share from continuing operations (pence per share) 
       Basic                                                              11         2.89       2.42 
       Diluted                                                            11         2.85       2.41 
       Adjusted Basic                                                     11         3.16       2.47 
       Adjusted Diluted                                                   11         3.12       2.46 
 
 

DOTDIGITAL GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 30 JUNE 2018

 
 
 
 
                                                                         30.6.18   30.6.17 
                                                                         GBP'000   GBP'000 
                                                                Notes 
 
 PROFIT FOR THE YEAR                                                       8,558     7,146 
 
 OTHER COMPREHENSIVE INCOME 
 Items that may be subsequently reclassified to profit and loss: 
          Exchange differences on translating foreign operations              20      (54) 
                                                                        --------  -------- 
 
 Total comprehensive income attributable to: 
  Owners of the parent                                                     8,578     7,092 
                                                                        ========  ======== 
 
 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 
          Comprehensive income from continuing operations                  8,578     7,092 
                                                                        ========  ======== 
 
 

DOTDIGITAL GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 JUNE 2018

 
 
 
 
                                                  30.6.18   30.6.17 
                                                  GBP'000   GBP'000 
                                          Notes 
 ASSETS 
 NON-CURRENT ASSETS 
 Goodwill                                  12       9,680       609 
 Intangible assets                         13       9,787     4,519 
 Property, plant and equipment             14       1,046     1,033 
                                                 --------  -------- 
 
                                                   20,513     6,161 
                                                 --------  -------- 
 
 CURRENT ASSETS 
 Trade and other receivables               16      12,953     7,847 
 Cash and cash equivalents                 17      15,005    20,428 
                                                 --------  -------- 
 
                                                   27,958    28,275 
                                                 --------  -------- 
 
 TOTAL ASSETS                                      48,471    34,436 
                                                 ========  ======== 
 
 
 EQUITY ATTRIBUTABLE TO THE 
 OWNERS OF THE PARENT 
 Called up share capital                   18       1,490     1,481 
 Share premium                             19       6,791     6,290 
 Reverse acquisition reserve               19     (4,695)   (4,695) 
 Other reserves                            19         661       305 
 Retranslation reserve                     19        (26)      (46) 
 Retained earnings                         19      32,331    25,306 
                                                 --------  -------- 
 
 TOTAL EQUITY                                      36,552    28,641 
 
 
 LIABILITIES 
 NON-CURRENT LIABILITIES 
 Deferred tax                              23       1,697       814 
                                                 --------  -------- 
 
 CURRENT LIABILITIES 
 Trade and other payables                  20      10,217     4,440 
 Financial liabilities - borrowings: 
 
        *    Interest bearing loans                     5         - 
 Current tax payable                                    -       541 
                                                 --------  -------- 
 
                                                   10,222     4,981 
                                                 --------  -------- 
 
 TOTAL LIABILITIES                                 11,919     5,795 
                                                 --------  -------- 
 
 TOTAL EQUITY & LIABILITIES                        48,471    34,436 
                                                 ========  ======== 
 
 

DOTDIGITAL GROUP PLC

COMPANY STATEMENT OF FINANCIAL POSITION

30 JUNE 2018

 
 
 
 
                                          30.6.18   30.6.17 
                                          GBP'000   GBP'000 
                                  Notes 
 ASSETS 
 NON-CURRENT ASSETS 
 Investments                       14      14,924     5,187 
                                         --------  -------- 
                                    5 
                                           14,924     5,187 
                                         --------  -------- 
 
 CURRENT ASSETS 
 Trade and other receivables       16       1,105     4,633 
 Cash and cash equivalents         17         646       591 
                                         --------  -------- 
 
                                            1,751     5,224 
                                         --------  -------- 
 
 TOTAL ASSETS                              16,675    10,411 
                                         ========  ======== 
 
 
 EQUITY ATTRIBUTABLE TO THE 
 OWNERS OF THE PARENT 
 Called up share capital           18       1,490     1,481 
 Share premium                     19       6,791     6,290 
 Other reserves                    19         661       305 
 Retained earnings                 19       5,761     2,239 
                                         --------  -------- 
 
 TOTAL EQUITY                              14,703    10,315 
 
 
 LIABILITIES 
 CURRENT LIABILITIES 
 Trade and other payables          20       1,972        96 
 
 TOTAL LIABILITIES                          1,972        96 
                                         --------  -------- 
 
 TOTAL EQUITY & LIABILITIES                16,675    10,411 
                                         ========  ======== 
 
 
 

DOTDIGITAL GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 30 JUNE 2018

 
 
                                    Called 
                                  up share     Retained     Share 
                                   capital     earnings   premium 
                                   GBP'000      GBP'000   GBP'000 
 
 Balance as at 1 July 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 
 
 Issue of share capital                  9            -       501 
 Dividends                               -      (1,627)         - 
 Transfer in reserves                    -           94         - 
 Share-based payment                     -            -         - 
                                ----------  -----------  -------- 
 Transactions with owners                9      (1,533)       501 
                                ----------  -----------  -------- 
 
 Profit for the year                     -        8,558         - 
 Other comprehensive income              -            -         - 
                                ----------  -----------  -------- 
 Total comprehensive income              -        8,558         - 
                                ----------  -----------  -------- 
 
 Balance as at 30 June 2018          1,490       32,331     6,791 
                                ==========  ===========  ======== 
 
 
 

DOTDIGITAL GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 30 JUNE 2018

 
 
  CONTINUED... 
                                                    Reverse                Total 
                               Retranslation    acquisition      Other    equity 
                                     reserve        reserve   reserves 
                                     GBP'000        GBP'000    GBP'000   GBP'000 
 
 Balance as at 1 July 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 
 
 Issue of share capital                    -              -          -       510 
 Dividends                                 -              -          -   (1,627) 
 Transfer in reserves                      -              -       (94)         - 
 Share-based payments                      -              -        450       450 
 Transactions with owners                  -              -        356     (667) 
                              --------------  -------------  ---------  -------- 
 
 Profit for the year                       -              -          -     8,558 
 Other comprehensive income               20              -          -        20 
                              --------------  -------------  ---------  -------- 
 Total comprehensive income               20              -          -     8,578 
                              --------------  -------------  ---------  -------- 
 
 Balance as at 30 June 2018             (26)        (4,695)        661    36,552 
                              ==============  =============  =========  ======== 
 
 
 
   --      Share capital is the amount subscribed for shares at nominal value. 

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

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

-- Retranslation reserve relates to the retranslation of foreign subsidiaries into the functional currency of the Group.

-- The reverse acquisition reserve relates to the adjustment required to account for the reverse acquisition in accordance with International Financial Reporting Standards.

-- Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2 and shares repurchased in the year classified as treasury shares.

DOTDIGITAL GROUP PLC

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 30 JUNE 2018

 
 
                              Called 
                            up share     Retained     Share         Other 
                             capital     earnings   premium      Reserves   Total equity 
                             GBP'000      GBP'000   GBP'000       GBP'000        GBP'000 
 
 Balance as at 1 July 
  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 
 
 Issue of share capital            9            -       501             -            510 
 Dividends                         -      (1,627)         -             -        (1,627) 
 Transfer in reserves              -           94         -          (94)              - 
 Share-based payments              -            -         -           450            450 
                          ----------  -----------  --------  ------------  ------------- 
 Transactions with 
  owners                           9      (1,533)       501           356          (667) 
                          ----------  -----------  --------  ------------  ------------- 
 
 Profit for the year               -        5,055         -             -          5,055 
 Total comprehensive 
  income                           -        5,055         -             -          5,055 
                          ----------  -----------  --------  ------------  ------------- 
 
 Balance as at 30 
  June 2018                    1,490        5,761     6,791           661         14,703 
                          ==========  ===========  ========  ============  ============= 
 
 
 
   --      Share capital is the amount subscribed for shares at nominal value. 

-- Retained earnings represents the cumulative earnings of the Company attributable to equity shareholders.

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

-- Other reserves relate to the charge for the share-based payment in accordance with International Financial Reporting Standard 2 and shares repurchased in the year classified as treasury shares.

DOTDIGITAL GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARED 30 JUNE 2018

 
 
 
 
                                                                30.6.18   30.6.17 
                                                                GBP'000   GBP'000 
                                                       Notes 
 Cash flows from operating activities 
 Cash generated from operations                         28       13,129     8,813 
 Tax paid                                                         (501)     (685) 
                                                              ---------  -------- 
 
 Net cash generated from operating activities                    12,628     8,128 
                                                              ---------  -------- 
 
 
 Cash flows from investing activities 
 Purchase of subsidiary, net of cash acquired*                  (9,578)         - 
 Purchase of intangible fixed assets                            (6,876)   (2,379) 
 Purchase of tangible fixed assets                                (475)     (375) 
 Sale of tangible fixed assets                                        -        48 
 Interest received                                                    9        15 
                                                              ---------  -------- 
 
 Net cash flows used in investing activities                   (16,920)   (2,691) 
                                                              ---------  -------- 
 
 
 Cash flows from financing activities 
 Equity dividends paid                                          (1,627)   (2,479) 
 Loan repayments                                                   (14)         - 
 Share issue                                                        510       157 
 
 Net cash flows from financing activities                       (1,131)   (2,322) 
                                                              ---------  -------- 
 
 
 (Decrease)/Increase in cash and cash equivalents               (5,423)     3,115 
 
 Cash and cash equivalents at beginning of year         29       20,428    17,313 
                                                              ---------  -------- 
 
 Cash and cash equivalents at end of year               29       15,005    20,428 
                                                              =========  ======== 
 
 
 

*Cash acquired GBP157,884, please refer to Note 12.

DOTDIGITAL GROUP PLC

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEARED 30 JUNE 2018

 
 
 
 
                                                             30.6.18   30.6.17 
                                                             GBP'000   GBP'000 
                                                     Notes 
 Cash flows from operating activities 
 Cash generated from operations                       28      10,909     2,274 
                                                            --------  -------- 
 
                                                              10,909     2,274 
                                                            --------  -------- 
 Net cash generated from operating activities 
 
 Cash from investing activities 
 
 Purchase of investments                                     (9,737)         - 
                                                            --------  -------- 
 
 Net cash flows from investing activities                    (9,737)         - 
                                                            --------  -------- 
 
 Cash flows from financing activates 
 Equity dividends paid                                       (1,627)   (2,479) 
 Share issue                                                     510       157 
 
 Net cash flows from financing activities                    (1,117)   (2,322) 
                                                            --------  -------- 
 
 
 Increase in cash and cash equivalents                            55      (48) 
 
 Cash and cash equivalents at beginning of year       29         591       639 
                                                            --------  -------- 
 
 Cash and cash equivalents at end of year             29         646       591 
                                                            ========  ======== 
 
 

DOTDIGITAL GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARED 30 JUNE 2018

 
 
 
   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. The principal activity of the Group is described on page 34.

   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 2017 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 2017 and have not been early adopted.

 
 Reference              Title                    Summary                 Application date of    Application date of 
                                                                         standard               Group 
---------------------  -----------------------  ----------------------  ---------------------  ----------------------- 
 
 IFRS 2                 Share Based Payments     Amendments to clarify   Periods beginning on   1 July 2018 
                                                 the classification      or after 1 January 
                                                 and measurement of      2018 
                                                 share based 
                                                 transactions 
---------------------  -----------------------  ----------------------  ---------------------  ----------------------- 
 IFRS 3                 Business Combinations    Amendments resulting    Periods beginning on   1 July 2019 
                                                 from the annual         or after 1 January 
                                                 review cycle.           2019 
---------------------  -----------------------  ----------------------  ---------------------  ----------------------- 
 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 9                 Financial Instruments    Amendments regarding    Periods beginning on   1 July 2018 
                                                 the interaction of      or after 1 January 
                                                 IFRS 4 and IFRS9        2018 
 IFRS 9                 Financial Instruments    Amendments regarding    Periods beginning on   1 July 2019 
                                                 prepayment features     or after 1 January 
                                                 with negative           2019 
                                                 compensation and 
                                                 modifications of 
                                                 financial 
                                                 liabilities 
 IFRS 11                Joint Arrangements       Amendments resulting    Periods beginning on   1 July 2019 
                                                 from the annual         or after 1 January 
                                                 review cycle.           2019 
 IFRS 15                Revenue from Contracts   Original issue        Periods beginning on     1 July 2018 
                        with Customers                                 or after 1 January 
                                                                       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 40                 Investment Property      Amendments to         Periods beginning on     1 July 2018 
                                                 clarify transfers     or after 1 January 
                                                 or property to, or    2018 
                                                 from, investment 
                                                 property. 
---------------------  -----------------------  --------------------  -----------------------  ----------------------- 
 IFRS 1, IFRS 2, IAS 28   Annual improvements    Amendments            Annual periods           1 July 2018 
                          2014-2016 Cycle        resulting             beginning on and after 
                                                                       1 January 2018 
-----------------------  ---------------------  --------------------  -----------------------  ----------------------- 
 IFRS 16                  Leases                 Original issue        Annual periods           1 July 2019 
                                                                       beginning on or after 
                                                                       1 January 2019 
-----------------------  ---------------------  --------------------  -----------------------  ----------------------- 
 Amendments to IFRIC 22   Foreign Currency       Amendments to         Annual periods           1 July 2019 
                          transactions and       clarify the           beginning on or after 
                          advance                accounting for        1 January 2019 
                          consideration          transactions that 
                                                 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 
-----------------------  ---------------------  --------------------  -----------------------  ----------------------- 
 
 

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 Group. The Group 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 and expects this to have an immaterial impact on the financial statements for the year ended 30 June 2018 of circa GBP500k on revenue.

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 providing SaaS via a leading omni-channel marketing automation platform and managed services to digital marketing professionals.

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.

The Group applies the acquisition method to account for business combinations. In the statement of financial position, the acquiree's identifiable assets and liabilities are initially recognised at their fair values at the acquisition date.

As a result of applying reverse acquisition accounting since 30 January 2009, the consolidated IFRS financial information of dotdigital Group Plc is a continuation of the financial information of 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 omni-channel 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 and is allocated to cash generating units.

Under IFRS 3 "Business Combinations", goodwill arising on acquisitions is not subject to amortisation but is subject to annual impairment testing. Any impairment is recognised immediately in the income statement and not subsequently reversed.

Investments in subsidiaries

Investments are held as non-current assets at cost less any provision for impairment. Where the recoverable amount of the investment is less than the carrying amount, impairment is recognised.

Intangible assets

Intangible assets are recorded as separately identifiable assets and recognised at historical cost less any accumulated amortisation. These assets are amortised over their useful economic lives of four to five years, with the charge included in administrative expenses in the income statement.

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. 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.

-Technology

Technology represents the cost that would be incurred to build the entire Comapi platform had the acquisition not occurred. The useful life of this intangible asset is assessed to have a finite life of 10 years. Amortisation is charged on assets with finite lives, and until economic benefit can be received and recognised, this expense is taken to the income statement and useful lives are reviewed on an annual basis. Amortisation is charged from the point when the asset is available for use.

-Customer relationships

This represents the value of high value customer contracts within Comapi. The useful life of this intangible asset is assessed to have a finite life of 9 years. Amortisation is charged on assets with finite lives, and until economic benefit can be received and recognised, this expense is taken to the income statement and useful lives are reviewed on an annual basis. Amortisation is charged from the point when the asset is available for use.

Impairment of non-financial assets (excluding goodwill)

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Property, plant and equipment

Tangible non-current assets are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the assets' carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits are associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is provided at the following rates in order to write off each asset over its estimated useful life and is based on the cost of assets less residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

   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 data-driven omni--channel marketing automation platform, dotmailer. Internal activities are continually undertaken to enhance and maintain the product in a bid to stay ahead of our competition. Management review the work of developers during the period and make the following judgements:

-Internal work relating to product development is reviewed against IAS 38 criteria and will be capitalised if management feel the criteria have been met.

-Internal work relating to the maintenance of existing products is expensed to the income statement and accounted for in payroll costs.

(b) Valuation of intangibles

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill and if negative, it is recognised in the consolidated income statement.

Judgement is required in determining the fair value of identifiable assets, liabilities and contingent assets and liabilities assumed in a business combination and the fair value of the consideration payable. Calculating the fair values involves the use of significant estimates and assumptions, including expectations about future cash flows, discount rates and the lives of assets following purchase.

Estimates and assumptions

   (a)   Estimated impairment of goodwill 

The Directors have carried out a detailed impairment review in respect of goodwill. The Group assesses at each reporting date whether there is an indication that an asset may be impaired, by considering the net present value of discounted cash flow forecasts which have been discounted at 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 12 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 27 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 

On the 21 November 2017, the Group completed the acquisition of Comapi whose line of business is the provision of omni-channel messaging and cloud communication. dotmailer's single line of business remains the provision of data-driven omni-channel marketing automation. The chief operating decision-maker considers the Group's segments to be by geographical location, this being UK, US and rest of the world ("RoW") operations and by business activity, this being dotmailer and Comapi as shown below:

Geographical revenue and results

 
                                         30.6.2018 
                          -------------------------------------- 
                                UK        US       RoW     Total 
                           GBP'000   GBP'000   GBP'000   GBP'000 
 Income statement 
 Revenue                    33,471     5,257     4,366    43,094 
 Gross profit               25,412     4,578     4,030    34,020 
 Profit before income 
  tax                        5,180     1,877     2,186     9,243 
                          --------  --------  --------  -------- 
 Total comprehensive 
  income attributable 
  to the owners of the 
  parent                     4,640     1,732     2,186     8,558 
                          ========  ========  ========  ======== 
 
 Financial position 
 Total assets               45,136     2,183       942    48,261 
 Net current assets         15,260     1,804       672    17,736 
                          ========  ========  ========  ======== 
 

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 (2017: none).

 
                                         30.6.2017 
                          -------------------------------------- 
                                UK        US       RoW     Total 
                           GBP'000   GBP'000   GBP'000   GBP'000 
 Income statement 
 Revenue                    24,743     3,907     3,316    31,966 
 Gross profit               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 
                          ========  ========  ========  ======== 
 
 Financial position 
 Total assets               32,578     1,556       302    34,436 
 Net current assets         21,961     1,120       213    23,294 
                          ========  ========  ========  ======== 
 

Business activity revenue and results

 
                                                 30.6.2018 
                                        Dotmailer   Comapi*     Total 
                                          GBP'000   GBP'000   GBP'000 
 Income statement 
 Revenue                                   36,891     6,203    43,094 
 Gross profit                              32,266     1,754    34,020 
 Profit before income 
  tax                                       8,619       624     9,243 
                                       ----------  --------  -------- 
 Total comprehensive 
  income attributable 
  to the owners of the 
  parent                                    7,936       622     8,558 
                                       ==========  ========  ======== 
 
 Financial position 
 Total assets                              44,413     3,848    48,261 
 Net current assets/(liabilities)          17,944     (208)    17,736 
                                       ==========  ========  ======== 
 
 
                                      30.6.2017 
                             Dotmailer   Comapi*     Total 
                               GBP'000   GBP'000   GBP'000 
 Income statement 
 Revenue                        31,966         -    31,966 
 Gross profit                   27,507         -    27,507 
 Profit before income 
  tax                            8,091         -     8,091 
                            ----------  --------  -------- 
 Total comprehensive 
  income attributable 
  to the owners of the 
  parent                         7,146         -     7,146 
                            ==========  ========  ======== 
 
 Financial position 
 Total assets                   34,436         -    34,436 
 Net current assets             23,294         -    23,294 
                            ==========  ========  ======== 
 

*The numbers included within Comapi are from the date of acquisition being 21 November 2017.

   4.            EMPLOYEES AND DIRECTORS 
 
                                                                                    30.6.18              30.6.17 
                                                                                    GBP'000              GBP'000 
 
       Wages and salaries                                                            14,149               11,217 
       Social security costs                                                          1,562                1,146 
       Other pension costs                                                              291                  252 
                                                                      ---------------------  ------------------- 
 
                                                                                     16,002               12,615 
                                                                      =====================  =================== 
 
          The average monthly number of employees during the year is as follows 
 
                                                                                    30.6.18              30.6.17 
 
       Directors                                                                          5                    6 
       Sales and Marketing product                                                      150                  120 
       Development and system engineers                                                  71                   56 
       Administration                                                                    53                   56 
                                                                      ---------------------  ------------------- 
 
                                                                                        279                  238 
                                                                      =====================  =================== 
 
 
    During the year the Group also capitalised staff-related costs of GBP4,023,222 (2017: GBP2,072,417) 
    in relation to internally generated development costs. 
 
 5. EXCEPTIONAL COSTS 
     Exceptional costs incurred in the year relate to the one-off acquisition costs of Comapi 
      of GBP208,805 (2017: 
      GBPnil) and amortisation of acquired intangibles of GBP148,110 (2017: GBPnil). 
 
 
   6. NET FINANCE INCOME 
                                                                                    30.6.18              30.6.17 
                                                                                    GBP'000              GBP'000 
       Finance income: 
       Deposit account interest                                                           9                   15 
                                                                      ---------------------  ------------------- 
 
                                                                                          9                   15 
                                                                      =====================  =================== 
 
 
 
   7.         OPERATING PROFIT 
 
  Costs by nature 
  Profit from continuing operations has been arrived after charging/(crediting):- 
                                                                                            30.6.18         30.6.17 
                                                                                            GBP'000         GBP'000 
 
  Direct marketing                                                                            4,586           2,073 
  Outsourcing                                                                                 2,121             186 
  Other costs                                                                                 2,367           2,200 
                                                                                           --------      ---------- 
 
       Total cost of sales                                                                    9,074           4,459 
                                                                                           ========      ========== 
 
 
                                                                                            30.6.18         30.6.17 
                                                                                            GBP'000         GBP'000 
 
  Staff related costs (inc Directors emoluments) - note 4                                    16,002          12,615 
  Operating leases: Land and buildings                                                          937             954 
  Operating lease: Other                                                                         38              43 
  Audit remuneration                                                                             49              40 
  Amortisation of intangibles                                                                 1,971           1,544 
  Depreciation charge                                                                           495             494 
  Legal, professional and consultancy fees                                                      518             424 
       Computer expenditure                                                                   2,161           1,809 
  Bad debts                                                                                      22               8 
  Foreign exchange (gains)/losses                                                               124            (21) 
  Travel and subsistence costs                                                                  501             425 
  Office running                                                                                152             158 
  Staff welfare                                                                                 406             301 
  Other costs                                                                                   603             475 
                                                                                           --------      ---------- 
 
  Total administration costs                                                                 23,979          19,269 
                                                                                           ========      ========== 
 
 
 
 
  During the year the Group obtained the following services from the Group's auditor at costs 
   detailed below: 
 
                                                                                           30.6.18       30.6.17 
                                                                                           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                                      37            28 
 
   *    audit of Company subsidiaries 
 
    *    non-audit fees: Tax and review of interim accounts                                      4             4 
                                                                                          --------      -------- 
 
                                                                                                49            40 
                                                                                          ========      ======== 
 
 
   8.            INCOME TAX EXPENSE 
 
  Analysis of the tax charge from continuing operations: 
                                                                                           30.6.18       30.6.17 
                                                                                           GBP'000       GBP'000 
 
  Current tax on profits for the year                                                          259           847 
  Deferred tax on origination and reversal of timing differences                               426            98 
                                                                                          --------      -------- 
 
                                                                                               685           945 
 
 
 
  Factors affecting the tax charge: 
                                                                                           30.6.18       30.6.17 
                                                                                           GBP'000       GBP'000 
 
  Profit on ordinary activities before tax                                                   9,243         8,091 
                                                                                          ========      ======== 
  Profit on ordinary activities multiplied by the standard rate of corporation tax in 
   the UK 
   of 19% (2017: 19.75%)                                                                     1,756         1,598 
  Effects of: 
  Expenses not deductible                                                                      137            12 
  Research and development enhanced claim                                                  (1,908)       (1,004) 
  Expenditure permitted on exercising options                                                (217)         (141) 
  Overseas tax losses                                                                           72            64 
  Capital allowances in excess of depreciation                                                 419           318 
                                                                                          --------      -------- 
 
  Total income tax                                                                             259           847 
                                                                                          ========      ======== 
 
 

Deferred tax was calculated using the rate 19% (2017: 19.75%). For further details on deferred tax see note 23.

Taxation for each region is calculated at the rates prevailing in the respective jurisdiction

A reduction in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020)

were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was

substantively enacted on 6 September 2016. This will reduce the Company's future current tax charge accordingly.

UK deferred tax assets and liabilities have been recognised at the rate applying in the period they are expected to

unwind.

   9.            PROFIT OF PARENT COMPANY 

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent Company is not presented as part of these financial statements. The parent Company's profit before exceptional items for the financial year was GBP5,055,276 (2017: loss: GBP390,345)

   10.          DIVIDS 
 
  Amounts recognised as distributions to equity holders in the period 
                                                                                               30.6.18   30.6.17 
                                                                                               GBP'000   GBP'000 
 
  Paid dividend for year end 30 June 2018 of 0.505p (2017: 0.857p) per share                     1,505     2,449 
                                                                                                ======  ======== 
 
  Proposed dividend for the year end 30 June 2018 of 0.64p (2017: 0.55p) per share               1,907     1,629 
                                                                                                ======  ======== 
 
    The proposed final dividend is subject to approval by the shareholders at the Annual General 
    Meeting and has not been included as a liability in these financial statements. 
 
 
   11.          EARNINGS PER SHARE 

Earnings per share data is based on the consolidated profit using and the weighted average number of shares in issue of the parent Company. Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. Adjusted earnings per share is based on the consolidated profit deducting the acquisition related exceptional costs and share-based payment.

A number of non-IFRS adjusted profit measures are used in this annual report and financial statements. Adjusting items are excluded from our headline performance measures by virtue of their size and nature, in order to reflect management's view of the performance of the Group. Summarised below is a reconciliation between statutory results to adjusted results. The Group believes that alternative performance measures such as adjusted EBITDA are commonly reported by companies in the markets in which it competes and are widely used by investors in comparing performance on a consistent basis without regard to factors such as depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred), or based on factors which do not reflect the underlying performance of the business. The adjusted profit after tax earnings measure is also used for the purpose of calculating adjusted earnings per share.

Reconciliations to earnings figures used in arriving at adjusted earnings per share are as follows:

 
                                        30.6.18   30.6.17 
 From continuing operations             GBP'000   GBP'000 
 
 Profit for the year attributable 
  to the owners of the parent             8,558     7,146 
 Amortisation of 
  acquisition related                       148         - 
  intangible fixed 
  asset (see note 
  13) 
 Other exceptional                          209         - 
  costs 
 Share based payment                        450       162 
 Adjusted profit for the 
  year attributable to 
  the owners of the parent                9,365     7,308 
                                       ========  ======== 
 

Management does not consider the above adjustments to reflect the underlying business performance.

The other exceptional costs relate to one-off acquisition costs of Comapi.

 
                                              30.6.18 
        ---------------------------------------------------------------------------------- 
                                                                      Weighted 
                                                                       average   Per share 
  From continuing operations                            Earnings     number of      Amount 
                                                         GBP'000        shares       Pence 
 
  Basic EPS 
  Profit for the year attributable 
   to the owners of the parent                             8,558   296,596,304        2.89 
 
  Adjusted Basic EPS 
  Adjusted profit for the year 
  attributable to the owners 
  of the parent                                            9,365   296,596,304        3.16 
 
  Options and warrants                                         -     3,728,052           - 
                                                       ---------  ------------  ---------- 
 
  Diluted EPS 
  Profit for the year attributable 
   to the owners of the parent                             8,558   300,324,356        2.85 
 
  Adjusted Diluted EPS 
  Adjusted profit for the year attributable 
   to the owners of the parent                             9,365   300,324,356        3.12 
                                                       =========  ============  ========== 
 
 
 
                                                                       30.6.17 
                                                     ------------------------------------------- 
                                                                            Weighted 
                                                                             average   Per share 
  From continuing operations                                Earnings       number of      Amount 
                                                             GBP'000          shares       Pence 
 
  Basic EPS 
  Profit for the year attributable 
   to the owners of the parent                                 7,146     295,457,101        2.42 
 
  Adjusted Basic EPS 
  Adjusted profit for the year 
  attributable to the owners 
  of the parent                                                7,308     295,457,101        2.47 
 
  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 
 
  Adjusted Diluted EPS 
  Adjusted profit for the year attributable 
   to the owners of the parent                                 7,308     296,518,839        2.46 
                                                           =========  ==============  ========== 
 
 

Weighted average number of shares

 
                          30.6.18       30.6.17 
                           Shares        Shares 
 
 Basic EPS            296,596,304   295,457,101 
                     ============  ============ 
 
 Diluted EPS          300,324,356   296,518,839 
                     ============  ============ 
 
 
   12.         GOODWILL 
 
 Group 
                    30.6.18   30.6.17 
 COST               GBP'000   GBP'000 
 At 1 July            4,121     4,121 
 Additions            9,071         - 
                   --------  -------- 
 
   At 30 June        13,192     4,121 
                   --------  -------- 
 
 AMORTISATION 
 At 1 July            3,512     3,512 
 Impairment               -         - 
                   --------  -------- 
 
 At 30 June           3,512     3,512 
                   --------  -------- 
 
 NET BOOK VALUE       9,680       609 
                   ========  ======== 
 
 

On 21 November 2017, the Group acquired all the voting rights of Comapi for a cash consideration of GBP10.7m (which includes the payment of loans in Comapi) in exchange for all Comapi shares, with a potential consideration of GBP1.2m in share options for the management team, dependent on them achieving specific performance targets over a 2-year post acquisition period and remaining with the business. Comapi's business is the provision of omni-channel messaging and cloud communication.

The Directors believe the acquisition will:

-- Extend dotdigital's marketing automation platform to provide an industry leading solution offering fully integrated omni-channel and conversational commerce support to marketers,

-- Enable dotdigital to deliver aligned conversational messaging across channels including email, mobile push, SMS, Facebook messenger, Apple business messenger, Twitter and live chat

-- Enable dotdigital customers to meet consumer demand for a more personalised communication experience and

-- Position dotdigital as the most advanced platform on the market and make dotdigital more relevant in the strategic mobile first Asian market.

Goodwill of GBP9.1m was recognised on the acquisition, being the excess of the purchase consideration over the provisional fair value of net assets acquired as set out below and represents Comapi's platform, key customer relationships, employee knowledge and skills and the acceleration of bringing the technology to our platform rather than building in-house.

Provisional Fair value of assets acquired

 
                                                                GBP'000s 
 Net assets acquired 
 Identifiable intangible 
  assets 
  Technology                                                       1,205 
  Customer relationships                                           1,200 
 Deferred tax recognised on identifiable intangible assets 
  Technology                                                       (228) 
  Customer relationships                                           (229) 
 Development costs                                                   501 
 Property, plant and equipment                                        42 
 Trade and other receivables                                       1,156 
 Cash and cash equivalents                                           158 
 Trade and other 
  payables                                                       (2,497) 
 Tax payable                                                       (643) 
 Net identifiable assets acquired                                    665 
 Goodwill                                                          9,071 
                                                              ---------- 
 Total consideration                                               9,736 
                                                              ========== 
 
 Purchase consideration                                            9,736 
 Cash acquired                                                     (158) 
                                                              ---------- 
 Consideration net of cash acquired                                9,578 
                                                              ========== 
 

The results of the acquired entity which have been consolidated in the income statement from 22 November 2017 contributed GBP6.2m of revenues and a profit of GBP0.6m to the profit attributable to equity shareholders of the Group during the year. Had Comapi been acquired at the start of the year, the contribution would have been GBP10.0m of revenue and a profit of GBP0.4m.

Goodwill is allocated to the Group's two cash generating units identified, that being dotmailer and Comapi. The goodwill addition in the year ended 30 June 2018 relates to the acquisition of Comapi and the goodwill at the beginning of the period relates to dotmailer.

Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently if there are indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated, at acquisition, to cash generating units (CGUs) that are expected to benefit from that business combination.

The carrying amount of goodwill relates to the Group's two trading activities and business segments. This has been tested for impairment during the current period by comparison with the recoverable amounts of the CGU. Recoverable amounts for CGUs are based on the higher of value in use and fair value less costs to sell. The recoverable amounts of the CGU have been determined from value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. 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% (2017: 10%). The valuations indicate sufficient headroom such that a reasonably possible change in key assumptions would not result in impairment of goodwill.

   13.          INTANGIBLE ASSETS 

Group

 
 
 
                                       Customer 
                                  relationships   Technology 
                                        GBP'000      GBP'000 
 COST 
 At 1 July 2017                               -            - 
 Additions                                    -            - 
 Introduced on acquisition                1,205        1,200 
                                 --------------  ----------- 
 
 At 30 June 2018                          1,205        1,200 
                                 --------------  ----------- 
 
 AMORTISATION 
 At 1 July 2017                               -            - 
 Amortisation for the year                    -            - 
 Introduced on acquisition                   78           70 
                                 --------------  ----------- 
 
 At 30 June 2018                             78           70 
                                 --------------  ----------- 
 
 NET BOOK VALUE 
  At 30 June 2018                         1,127        1,130 
                                 ==============  =========== 
 
 

Group

 
                                             Internally 
                                              generated 
                                Computer    development     Domain 
                                software          costs      names    Totals 
                                 GBP'000        GBP'000    GBP'000   GBP'000 
 COST 
 At 1 July 2017                      497         10,351         16    10,864 
 Additions                            94          4,377          -     4,471 
 Introduced on acquisition           215            558         21     3,199 
 
 At 30 June 2018                     806         15,286         37    18,534 
 
 AMORTISATION 
 At 1 July 2017                      320          6,009         16     6,345 
 Amortisation for the 
  year                                76          1,891          4     1,971 
 Introduced on acquisition           215             57         11       431 
 
 At 30 June 2018                     611          7,957         31     8,747 
 
 NET BOOK VALUE 
  At 30 June 2018                    195          7,329          6     9,787 
 
                                             Internally 
                                              generated 
                                Computer    development     Domain 
                                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 
                             ===========  =============  =========  ======== 
 
 

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.

Technology represents the cost that would be incurred to build the entire Comapi platform had the acquisition not occurred. Customer relationships represent the value of high value customer contracts within Comapi.

   14.          PROPERTY, PLANT AND EQUIPMENT 

Group

 
                               Short   Fixtures    Computer 
                                              & 
                           leasehold   fittings   equipment    Totals 
                             GBP'000    GBP'000     GBP'000   GBP'000 
 COST 
 At 1 July 2017                  499        534       1,393     2,426 
 Additions                        46         88         341       475 
 Disposals                         -       (28)        (18)      (46) 
 Introduced on 
  acquisition                     68         50         284       402 
 Exchange differences            (1)        (1)           -       (2) 
 
 At 30 June 2018                 612        643       2,000     3,255 
                          ----------  ---------  ----------  -------- 
 
 DEPRECIATION 
 At 1 July 2017                  214        379         800     1.393 
 Depreciation 
  for the year                    62         91         342       495 
 Eliminated of 
  disposal                         -       (24)        (17)      (41) 
 Introduced on 
  acquisition                     64         34         264       362 
 Exchange differences              -          1         (1)         - 
 
 At 30 June 2018                 340        481       1,388     2,209 
                          ----------  ---------  ----------  -------- 
 
 NET BOOK VALUE 
 At 30 June 2018                 272        162         612     1,046 
                          ==========  =========  ==========  ======== 
 
 
                               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 
                          ==========  =========  ==========  ======== 
 
   15.         INVESTMENTS 

Company

 
                                                   Shares in           Shares in 
                                                       Group               Group 
                                                undertakings        undertakings 
                                                     30.6.18             30.6.17 
       COST                                          GBP'000             GBP'000 
 
       At 1 July 2017                                  8,706               8,705 
   Additions                                           9,737                   1 
 
    At 30 June 2018                                   18,443               8,706 
 
       AMORTISATION 
  At 1 July 2017 and 30 June 2018                      3,519               3,519 
 
       NET BOOK VALUE 
  At 30 June 2018                                     14,924               5,187 
                                               =============       ============= 
 
 

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 
 Dynmark International Ltd        Omni-channel communication platform               Ordinary                100 
 Dynmark S.p z.o.o                Omni-channel communication platform               Ordinary                100 
 Donky Networks Ltd               Omni-channel communication platform               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, dotmailer Pty Limited and Dynmark S.p. z.o.o 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, dotmailer LLC was incorporated in the Republic of Belarus and Dynmark S.p. z.o.o. was incorporated in Poland.

   16.          TRADE AND OTHER RECEIVABLES 
 
                                  Group              Company 
                            30.6.18   30.6.17   30.6.18   30.6.17 
                            GBP'000   GBP'000   GBP'000   GBP'000 
 Current: 
 Trade receivables            8,677     6,425         -         - 
 Less: Provision for 
  impairment of trade 
  receivables                 (403)     (502)         -         - 
                           --------  --------  --------  -------- 
 
 Trade receivables 
  - net                       8,274     5,923         -         - 
 Other receivables              151       111         -         - 
 Amounts owed by Group 
  undertakings                    -         -       966     4,609 
 VAT                              -         -        12        14 
 Tax receivable                 312         -         -         - 
 Prepayments and accrued 
  income                      4,216     1,813       127        10 
                           --------  --------  --------  -------- 
 
                             12,953     7,847     1,105     4,633 
                           ========  ========  ========  ======== 
 

Further details on the above can be found in note 22.

Included within prepayments is an amount of GBP852,504 (2017: GBP621,065) in relation to deferred commission which is considered to be long term.

   17.          CASH AND CASH EQUIVALENTS 
 
                        Group              Company 
                  30.6.18   30.6.17   30.6.18   30.6.17 
                  GBP'000   GBP'000   GBP'000   GBP'000 
 
 Bank accounts     15,005    20,428       646       591 
 
                   15,005    20,428       646       591 
                 ========  ========  ========  ======== 
 

Further details on the above can be found in note 22.

   18.          CALLED UP SHARE CAPITAL 
 
  Allotted, issued, fully paid       Nominal   30.6.18   30.6.17 
  number                               value   GBP'000   GBP'000 
 
  298,030,565 (2017: 296,238,485)   GBP0.005     1,490     1,481 
                                              --------  -------- 
 
                                                 1,490     1,481 
                                              ========  ======== 
 
 

During the reporting period the Company undertook the following transactions involving the issuing and reclassifying of issued share capital:

On 28 November 2017 a number of employees exercised their share options increasing the issued share capital by 250,000 shares at a premium price of 95.5p.

On 11 May 2018 a number of employees exercised their share options increasing the issued share capital by 1,542,080 shares at a premium price of 91.5p.

   19.          RESERVES 

Group

 
                                                                      Reverse 
                                            Retained     Share    acquisition 
                                            earnings   premium        reserve 
                                             GBP'000   GBP'000        GBP'000 
 
  As at 1 July 2017                           25,306     6,290        (4,695) 
 
  Issue of share capital                           -       501              - 
  Dividends                                  (1,627)         -              - 
  Profit for the year                          8,558         -              - 
  Transfer of reserves                            94         -              - 
  Other comprehensive income: Currency             -         -              - 
   translation 
  Share-based payment                              -         -              - 
                                           ---------  --------  ------------- 
 
  Balance as at 30 June 2018                  32,331     6,791        (4,695) 
                                           =========  ========  ============= 
 
 
 
19.                                      RESERVES - continued 
                                             Retranslation      Other 
                                                   Reserve   reserves    Totals 
                                                   GBP'000    GBP'000   GBP'000 
 
  As at 1 July 2017                                   (46)        305    27,160 
 
  Issue of share capital                                 -          -       501 
  Dividends                                              -          -   (1,627) 
  Profit for the year                                    -          -     8,558 
  Transfer of reserves                                   -       (94)         - 
  Other comprehensive income: Currency 
   translation                                          20          -        20 
  Share-based payment                                    -        450       450 
                                            --------------  ---------  -------- 
 
  Balance as at 30 June 2018                          (26)        661    35,062 
                                            ==============  =========  ======== 
 
 

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 in reserves                            28 
  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 in reserves                                (28)         - 
  Currency translation                     (54)          -      (54) 
  Share-based payment                         -        162       162 
                                 --------------  ---------  -------- 
 
  Balance as at 30 June 2017               (46)        305    27,160 
                                 ==============  =========  ======== 
 
 
 
19.  RESERVES - continued 
 
 
 
   Company 
                           Retained     Share      Other 
                           earnings   premium   Reserves    Totals 
                            GBP'000   GBP'000    GBP'000   GBP'000 
 
 At 1 July 2017               2,239     6,290        305     8,834 
 
 Issue of share capital           -       501          -       501 
 Dividends                  (1,627)         -          -   (1,627) 
 Profit for the year          5,055         -          -     5,055 
 Transfer of reserves            94         -       (94)         - 
 Share-based payment              -         -        450       450 
                          ---------  --------  ---------  -------- 
 
 At 30 June 2018              5,761     6,791        661    13,213 
                          =========  ========  =========  ======== 
 
 
 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) 
 Loss for the year            (390)         -          -     (390) 
 Transfer in reserves            28         -       (28)         - 
 Share-based payment              -         -        162       162 
                          ---------  --------  ---------  -------- 
 
 At 30 June 2017              2,239     6,290        305     8,834 
                          =========  ========  =========  ======== 
 
   20.          TRADE AND OTHER PAYABLES 
 
                                Group              Company 
                          30.6.18   30.6.17   30.6.18   30.6.17 
                          GBP'000   GBP'000   GBP'000   GBP'000 
 Current: 
 Trade payables             6,184     1,194        15        52 
 Amounts owed to Group          -         -     1,913         - 
  undertakings 
 Social security and 
  other taxes                 480       415         -         - 
 Other payables                60        32         -         - 
 VAT                          989       830         -         - 
 Accruals and deferred 
  income                    2,504     1,969        44        44 
 
                           10,217     4,440     1,972        96 
                         ========  ========  ========  ======== 
 

Further details on liquidity and interest rate risk can be found in note 22.

   21.          LEASING AGREEMENTS 

Minimum lease payments under non-cancellable operating leases fall due as follows:

 
                                            30.6.18 
                                    Land & 
                                 Buildings    Others    Totals 
                                   GBP'000   GBP'000   GBP'000 
 
  Within one year                    1,094        45     1,139 
  Between two to five years          1,310        55     1,365 
                                ----------  --------  -------- 
 
                                     2,404       100     2,504 
                                ==========  ========  ======== 
 
                                            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 
                                ==========  ========  ======== 
 
 

Operating leases represent rents payable by the Group for its office properties and car leases. 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.

   22.          FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 

The Group's activities expose it to a number of financial risks that include credit risk, liquidity risk, currency risk and interest rate risk. These risks and the Group's policies for managing them have been applied consistently during the year and are set out below.

The Group holds no financial or other non-financial instruments other than those utilised in the working operations of the Group and that are listed in this note. It'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

   22.          FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - continued 

Financial instruments by category

The following table sets out the financial instruments as at the reporting date:

 
                                      Group              Company 
                                30.6.18   30.6.17   30.6.18   30.6.17 
                                GBP'000   GBP'000   GBP'000   GBP'000 
 Financial assets 
 Trade and other receivables     12,953     7,847       139        24 
 Bank balances                   15,005    20,428       646       591 
 
                                 27,958    28,275       785       615 
                               ========  ========  ========  ======== 
 
 Financial liabilities 
 Trade payables                   6,184     1,194        15        52 
 Amounts owed to group                -         -     1,913         - 
  undertakings 
 Accrued liabilities 
  and other payables              4,033     3,246        44        44 
 
                                 10,217     4,440     1,972        96 
                               ========  ========  ========  ======== 
 

The fair value of the financial assets and financial liabilities is equal to their carrying values. All financial assets are categorised as loans and receivables and all financial liabilities are categorised as financial liabilities at amortised costs.

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's risk committee. The Board receives quarterly reports from the Risk Committee through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility. Further details regarding these policies are set out below:

Interest rate risk

The Group's interest rate risk arises from interest-bearing assets and liabilities. The Group has in place a policy of maximising finance income by ensuring that cash balances earn a market rate of interest offsetting where possible cash balances, and by forecasting and financing its working capital requirements. As at the reporting date the Group was not exposed to any movement in interest rates as it has no external borrowings and therefore is not exposed to interest rate risk. No sensitivity analysis has been prepared.

The Group's working capital requirements are managed through regular monitoring of the overall cash position and regularly updated cash flow forecasts to ensure there are sufficient funds available for its operations.

Liquidity risk

The Group's working capital requirements are managed through regular monitoring of the overall position and regularly updated cash flow forecasts to ensure there are funds available for its operations. Management forecasts indicate no new borrowing facilities will be required in the upcoming financial period.

Trade and other payables of GBP7,233,000 (2017: GBP2,056,000) 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 2018 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:

 
                           30.6.18   30.6.17 
                           GBP'000   GBP'000 
 
  0-30 days                  6,172     4,845 
  30-60 days                   720        67 
  More than 60 days          1,785     1,513 
 
                             8,677     6,425 
                          ========  ======== 
 

The maturity of the Group's provision for impairment is as follows:

 
                           30.6.18   30.6.17 
                           GBP'000   GBP'000 
 
  0-30 days                      -         8 
  30-60 days                     -         8 
  More than 60 days            403       486 
 
                               403       502 
                          ========  ======== 
 

The movement in the provision for the impairment is as follows:

 
                                   30.06.18   30.6.17 
                                    GBP'000   GBP'000 
 
  As at 1 July                          502       824 
 
  Provision for impairment               40        82 
  Receivable written off in 
   the year                            (72)      (65) 
  Unused amount reversed               (67)     (339) 
                                  --------- 
 
  As at 30 June                         403       502 
                                  =========  ======== 
 

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 GBP2,041,922 (2017: GBP1,581,391) of which GBP402,985 (2017: GBP460,837) 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 (2017: GBPnil) and amounts payable over one year are nil (2017: 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.

    23.         DEFERRED TAX 
 
                                                    30.6.18   30.6.17 
                                                    GBP'000   GBP'000 
 
  As at 1 July                                          814       716 
  Current year provision                                426        98 
  Provision on recognition of intangibles on            457         - 
   acquisition 
 
                                                      1,697       814 
                                                   ========  ======== 
 

The deferred tax liability above comprises the following temporary differences:

 
                                                     30.6.18   30.6.17 
                                                     GBP'000   GBP'000 
 
 Capital allowances in excess of depreciation            607       113 
 R&D relief in excess 
  of amortisation                                      1,204       858 
 Share option relief                                   (114)     (157) 
 
                                                       1,697       814 
                                                    ========  ======== 
 

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.

   24.          CAPITAL COMMITMENTS 

The Company and Group have no capital commitments as at the year end.

   25.          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

 
                                                                 30.6.18   30.6.17 
                                                                 GBP'000   GBP'000 
  Sale of services 
                                                         Email 
                           Entity under common       marketing 
  Cadence Performance             directorship        services         2         2 
                                                        Email 
  Cloudcall Group          Entity under common      marketing 
   Plc                            directorship       services         16         - 
 
                                                                      18         2 
                                                                ========  ======== 
 
 
 
 Year end balances arising 
  from sale of services 
                                                            Email 
 Cloudcall Group               Entity under common      marketing 
  Plc                                 directorship       services     16     - 
 
                                                                      16     - 
                                                                     === 
 
 

Directors

 
                                                         30.6.18   30.6.17 
                                                         GBP'000   GBP'000 
 
  Aggregate emoluments                                       701       558 
  Ex-gratia payment                                           40         - 
  Company contributions to money purchase pension 
   scheme                                                     26        50 
  Share-based payments from the LTIP options 
   granted                                                   145       123 
 
                                                             912       731 
                                                        ========  ======== 
 

Directors' pay summary does not include Non-Executive Directors.

Information in relation to the highest paid Director is as follows:

 
                                                     30.6.18   30.6.17 
                                                     GBP'000   GBP'000 
 
  Salaries                                               395       372 
  Other benefits                                          12        10 
  Pension costs                                           13        25 
  Share-based payments on the LTIP 
   options granted                                       145         - 
 
                                                         565       407 
                                                    ========  ======== 
 
 

Company

The following transactions were carried out with related parties

 
                                                                    30.06.18   30.06.17 
                                                                     GBP'000    GBP'000 
  Year end balances arising 
   from sales/purchase of services 
 
  dotmailer Limited                     Subsidiary       Payables    (5,350)    (5,338) 
 
                                                                     (5,350)    (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/from related parties

 
                                         30.6.18   30.6.17 
                                         GBP'000   GBP'000 
  dotmailer Limited    Subsidiary 
  As at 1 July                             9,950    12,417 
  Loans advanced                              97        40 
  Loans repaid                          (12,606)   (2,507) 
 
                                         (2,559)     9,950 
                                       =========  ======== 
 
   26.          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, dotmailer LLC, Dynmark International Ltd, Dynmark S.p. z.o.o. and Donky Networks Ltd.

   27.          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 GBP450,000 (2017: GBP162,000).

Vesting conditions of the options dictate that employees must remain in the employment of the Group for the whole period to qualify.

Movement in issued share options during the year

The table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options during the period. The options outstanding at 30 June 2018 had a WAEP of 9.43p (2017: 33.35p) and a weighted average contracted life of 4.16 years (2017: 2.67 years) and their exercise prices ranged from 0.5p to 68.50p. All share options are settled in form of equity issued.

 
                                             30.06.18                            30.6.17 
                                   No of options        WAEP           No of options        WAEP 
 
      Outstanding at the 
       beginning of the 
       period                          2,540,145         33.35p            4,104,029         26.69p 
      Granted during the 
       year                            2,984,197           0.5p              230,985         68.50p 
      Forfeited/cancelled 
       during the period                       -             0p              706,460         35.30p 
      Exchanged for shares             1,792,080         28.46p            1,088,409        694.91p 
                             -------------------  -------------  -------------------  ------------- 
      Outstanding at the 
       end of the period               3,732,262          9.43p            2,540,145         33.35p 
                             -------------------  -------------  -------------------  ------------- 
      Exercisable at the 
       end of the period                 517,080         34.57p              500,000         15.63p 
 
 
 
             The weighted average share price at the date of the exercise for share 
             options exercised during the period was 28.46p (2017: 694.91p). 
                                                                          20          25         28    18 October 
                                                                        June    November   November          2013 
                                                                        2017        2015       2014 
 
              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%          1%         0%         0.4% 
              Fair value of                                           12.04p       6.46p      5.33p        3.31p 
              options/warrants 
 
 
                                                                                                  19               21 
                                                                                               December      November 
                                                                                                 2017            2017 
 
              Number of options 
               granted                                                                         1,375,000    1,609,197 
              Share price at 
               grant date                                                                        85.95p        78.30p 
              Exercise price                                                                       0.50p        0.50p 
              Option life in                                                                     5 years      5 years 
               years 
              Risk free rate                                                                       1.33%      1.33% 
              Expected volatility                                                                    30%       30% 
              Expected dividend 
               yield                                                                                  1%        1% 
              Fair value of                                                                          81p       74p 
              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. 
 
             The share options granted on the 21 November 2017 were in respect of 
             the acquisition of Comapi to the management team for retention and performance 
             post acquisition. 
 
             The share options granted on 19 December 2017 were following the approval 
             of the LTIP scheme at the AGM on 19 December 2017 and the end-to-end 
             awards that were granted to the Chief Executive Officer. 
 
 
28.  GROUP RECONCILIATION OF PROFIT BEFORE CORPORATION TAX TO CASH GENERATED 
      FROM OPERATIONS 
 
 
                                         Group              Company 
                                   30.6.18   30.6.17   30.6.18   30.6.17 
                                   GBP'000   GBP'000   GBP'000   GBP'000 
 Current: 
 Profit before tax from 
  all operations                     9,243     8,091     5,055     (390) 
 Currency revaluation                   20      (54)         -         - 
 Depreciation                        2,614     2,038         -         - 
 Gain/(loss) on disposal 
  of fixed assets                        2      (58)         -         - 
 Share-based payments                  450       162       450       162 
 Finance income                        (9)      (15)         -         - 
                                  --------  --------  --------  -------- 
 
                                    12,320    10,164     5,505     (228) 
 
 (Increase)/decrease in 
  trade receivables                (4,794)   (1,641)     3,528     2,469 
 Increase/(decrease) in 
  trade payables                     5,603       290     1,876        33 
                                  --------  --------  --------  -------- 
 
 Cash generated from operations     13,129     8,813    10,909     2,274 
                                  ========  ========  ========  ======== 
 
   29.          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 2016          17,313       639 
                           ========  ======== 
 
  As at 30 June 2017         20,428       591 
                           ========  ======== 
 
  As at 30 June 2018         15,005       646 
                           ========  ======== 
 
 
   30.          PROJECT DEVELOPMENT 

During the period the Group incurred GBP4,376,645 (2017: GBP2,243,687) in development investments. All resources utilised in development have been capitalised as outlined in the accounting policy governing this area.

   31.          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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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