As digital marketers rush to engage consumers on their smartphones, social media feeds and email accounts, many are turning to dotDigital (DOTD), whose easy-to-use software lets them craft automated, cross-channel campaigns with only a few clicks. Strong demand drove a 17 per cent increase in first-half operating profits.
But the shares slid 7 per cent on the news. That may reflect dotDigital's decision to launch a two-year, £3m investment programme that threatens to depress short-term earnings growth. However, it should also deepen the group's foothold in the enormous US and Asia Pacific markets. Investors may also be skittish about the recent departure of veteran chief executive Peter Simmonds.
There were plenty of positives: sales of email-related creative and managed services rose 38 per cent, while recurring monthly revenues from dotmailer, its flagship software offering, surged 28 per cent to £7.4m. Moreover, the group's focus on fast-growing medium-sized businesses sparked a 41 per cent increase in dotmailer users' average monthly recurring spend to £400. The group also signed over 300 new clients, including technology giant Honeywell and property consultancy Knight Frank.
Broker finnCap slashed its pre-tax profit forecast in anticipation of higher operating costs. It now expects £4.8m this year, giving EPS of 1.4p, up from £3.6m and 1.2p.
| DOTDIGITAL (DOTD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 35p | MARKET VALUE: | £100m | |
| TOUCH: | 35-36p | 12-MONTH HIGH: | 42p | LOW: 26p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 6p* | NET CASH: | £9.5m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 7.6 | 2.2 | 0.7 | nil |
| 2014 | 10.0 | 2.5 | 0.8 | nil |
| % change | +32 | +17 | +15 | - |
*Includes intangible assets of £3.9m, or 1.3p a share | ||||
