dotdigital: subscribe for growth

True, the group’s shares have dipped in recent weeks. Broker Panmure Gordon attributes this partly to concerns around GDPR, the EU’s new data privacy rules. dotdigital hinted at the challenge of GDPR within its results for the six months to December 2017, pointing out that some European customers had lengthened their purchasing cycles to assess customer data. Still, Panmure believes the impact of the regulation has been misunderstood by the market and should be minor, given that dotDigital bans spam to maintain the 'white-list' industry status. 

Moreover, dotDigital itself has implied that it could benefit from GDPR. The improved data-sets resulting from the rules’ implementation may bring better insights to customers that would improve their return on investment and, in turn, help drive dotDigital's revenue growth. Not that growth is an issue. First-half sales rose 25 per cent to £18.8m, with 17 per cent organic growth and an increased contribution from international markets. Nevertheless, the shares trade at a multiple of next-12-month forecast earnings, which is slightly below the two-year average.

Within its half-year numbers, dotDigital delivered against all three of its strategic pillars – geographic expansion, product innovation and partnerships. Despite the “cycle lengthening” tied to GDPR, sales for the dominant European and Middle Eastern business rose at a double-digit rate. Meanwhile, core international sales represented a quarter of total revenues – up from 22 per cent. US sales climbed 44 per cent to $3.3m, while Asia-Pacific enjoyed a whopping 75 per cent sales hike to A$0.9m (£0.5m).

dotDigital boosted its relevance to the 'mobile first' Asian market when it purchased Comapi – a cloud communications business – last November for £10.7m. In keeping with the group’s product innovation strategy, Comapi allows it to provide aligned conversational messaging across multiple channels, including email, Twitter and live chat. The acquisition has accelerated dotDigital’s overall shift towards a fully-fledged "omnichannel" offering, which should help it distinguish itself from the many competitors in the digital marketing arena.

Meanwhile, strategic partnerships contributed strongly to organic growth. Half-year sales through partnerships with the likes of e-commerce platforms Magento, Shopify and Big Commerce rose 35 per cent to £7.2m – almost two-fifths of the total.