Sign on the dotdigital line

The group's software aims to improve its clients' customer engagement through data-led, personalised marketing campaigns accompanied by feedback on return on investment. Signalling its products' success, dotdigital's sales growth has been strong and a 21 per cent compound annual growth rate (CAGR) is forecast by house broker FinnCap to 2020.

For the half-year to December 2018, revenues climbed 33 per cent to £24.9m. This was bolstered by a 15 per cent improvement in organic sales to £20.1m. The group bases organic growth on three “pillars”: geographical expansion, strategic partnerships and product innovation.

International sales for its engagement cloud constituted 30 per cent of total revenues in the first half, up from a quarter. And encouragingly, despite the introduction of Europe's new general data protection rules (GDPR) and Brexit uncertainty, sales for the Europe, Middle East and Africa region grew by a tenth. The impact of GDPR may weigh on sales for a while yet, but should recede over time.  

Meanwhile, sales via strategic e-commerce partners, such as Magento and Shopify, rose 43 per cent to £10.3m. The group could get a boost from the recent removal of the MailChimp app from Shopify (the third-largest e-commerce platform globally). While a simpler product, MailChimp is a rival to dotdigital, so sales could benefit from Shopify users searching for an alternative.

Beyond its organic game plan, dotdigital’s acquisition of Comapi in November 2017 for up to £12.2m has helped it achieve true omnichannel status, as it now supports marketers across email, mobile, social media and live chat applications.

Comapi’s communications-platform-as-a-service (CPaaS) market was hit by challenges at the half-year stage, with some retail customers entering administration. But this did little to knock the group’s overall profits. And, encouragingly, dotdigital announced in May that Comapi’s CPaaS technology has been fully integrated into the engagement cloud platform. Management’s decision to wind down a non-core part of Comapi should prove to be positive for cash flo, enabling dotdigital to lift future investment in its higher-margin core SaaS products.