Replacement: Preliminary Results

The following amendment has been made to the 'Preliminary Results' announcement released on 16 October 2018 at 7.00am under RNS No 1163E.

The sentence 'EMEA revenue grew 11% (excluding Comapi) to £27.3m (2017: £30.4m) despite impact of GDPR' has been amended to 'EMEA revenue grew 11% (excluding Comapi) to £30.4m (2017: £27.3m) despite impact of GDPR.'

All other details remain unchanged.

The full amended text is shown below.

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 £43.1m (2017: £32.0m)

· Adjusted EBITDA¹ grew 21% to £12.5m (2017: £10.3m)

· Adjusted operating profit² grew 22% to £10.0m (2017: £8.2m)

· Strong cash balance at period end of £15.0m (2017: £20.4m)

o Includes the acquisition and funding of Comapi for £11.5m (£10.7m acquisition cost)

· Comapi omni-channel acquisition fully integrated and performing in line with expectations

· ARPU³ grew 18%, increasing from £715 per month to £845 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 £1,512 per month

· Expanding relationships with Shopify, BigCommerce and Shopware enhancing ecommerce

· Microsoft Dynamics integration delivers 42% ARPU growth to £1,405 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 £30.4m (2017: £27.3m) 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 Milan Patel, CEO Paraag Amin, CFO	Tel: [phone]
FTI Consulting (Financial PR and Investor Relations) Matt Dixon Adam Davidson	Tel: [phone]
N+1 Singer (Nominated Adviser and Joint Broker) Shaun Dobson, Head of Corporate Finance Rachel Hayes, Corporate Broking Alex Bond, Corporate Finance	Tel: [phone]
finnCap (Joint Broker) Stuart Andrews, Corporate Finance Rhys Williams, Sales Camille Gochez, Equity Capital Markets Alice Lane, Equity Capital Markets	Tel: [phone]

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 £43.1m, of which organic revenue growth was 15% and the remainder as a result of the Comapi acquisition, which contributed £6.2m 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 £27.3m to £30.4m, 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 £8.9m, 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 £4.1m.

During the year, dotmailer's average revenue per user rose by 18% from £715 per month to £845 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 £1,500 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 £8.8bn in 2017 to £19.3bn 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 £27.3m to £30.4m. 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 £8.9m 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 £9.2m. 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 £1,512 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 £1,032 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 £6m. 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 £1,405 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 £10.7m (which includes the payment of loans in Comapi), with a potential consideration of £1.2m 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 £43.1m. 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 £6.2m 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 £10.3m to £12.5m. 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 £13.1m (2017: £8.8m). The cash at the end of the period was standing at £15.0m (2017: £20.4m), despite the acquisition of Comapi for a cash consideration of £10.7m. 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 £2.1m.

Goodwill

£9.1m of Goodwill reflects the acquisition of Comapi in the year, for a cash consideration of £10.7m. Identifiable intangible assets included £1.2m of technology and £1.2m 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 £0.7m 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 Chief Executive Officer 15 October 2018

Paraag Amin Chief Financial Officer 15 October 2018

DOTDIGITAL GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2018

					30.6.18		30.6.17
					£'000		£'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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 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 standard	Application date of Group
IFRS 2	Share Based Payments		Amendments to clarify the classification and measurement of share based transactions		Periods beginning on or after 1 January 2018	1 July 2018
IFRS 3	Business Combinations		Amendments resulting from the annual review cycle.		Periods beginning on or after 1 January 2019	1 July 2019
IFRS 4	Insurance Contracts		Amendments regarding the interaction of IFRS 4 and IFRS9		Periods beginning on or after 1 January 2018	1 July 2018
IFRS 9	Financial Instruments		Amendments regarding the interaction of IFRS 4 and IFRS9		Periods beginning on or after 1 January 2018	1 July 2018
IFRS 9	Financial Instruments		Amendments regarding prepayment features with negative compensation and modifications of financial liabilities		Periods beginning on or after 1 January 2019	1 July 2019
IFRS 11	Joint Arrangements		Amendments resulting from the annual review cycle.		Periods beginning on or after 1 January 2019	1 July 2019
IFRS 15	Revenue from Contracts with Customers		Original issue	Periods beginning on or after 1 January 2018		1 July 2018
			Amendments to defer the effective date	Periods beginning on or after 1 January 2018		1 July 2018
			Clarifications to IFRS	Periods beginning on or after 1 January 2018		1 July 2018
IAS 40	Investment Property		Amendments to clarify transfers or property to, or from, investment property.	Periods beginning on or after 1 January 2018		1 July 2018
IFRS 1, IFRS 2, IAS 28		Annual improvements 2014-2016 Cycle	Amendments resulting	Annual periods beginning on and after 1 January 2018		1 July 2018
IFRS 16		Leases	Original issue	Annual periods beginning on or after 1 January 2019		1 July 2019
Amendments to IFRIC 22		Foreign Currency transactions and advance consideration	Amendments to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.	Annual periods beginning on or after 1 January 2019		1 July 2019
IFRIC 23		Uncertainty over income tax treatment	Address how to reflect uncertainty in accounting for income tax	Annual periods beginning on or after 1 January 2019		1 July 2019

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 £500k on revenue.

The financial statements are presented in sterling (£), 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 financial position of all the Group entities (none of which has the currency of a hyper-inflationary 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 (£) 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
		£'000		£'000		£'000		£'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
		£'000		£'000		£'000		£'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
				£'000		£'000		£'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
				£'000		£'000		£'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
					£'000		£'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 £4,023,222 (2017: £2,072,417) 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 £208,805 (2017: £nil) and amortisation of acquired intangibles of £148,110 (2017: £nil).
6. NET FINANCE INCOME
					30.6.18		30.6.17
					£'000		£'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
						£'000				£'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
							£'000				£'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
				£'000				£'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
				£'000				£'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
					£'000				£'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 £5,055,276 (2017: loss: £390,345)

10. DIVIDENDS

	Amounts recognised as distributions to equity holders in the period
				30.6.18			30.6.17
				£'000			£'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				£'000		£'000
Profit for the year attributable to the owners of the parent				8,558		7,146
Amortisation of acquisition related intangible fixed asset (see note 13)				148		-
Other exceptional costs				209		-
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
							£'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
							£'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		£'000		£'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 £10.7m (which includes the payment of loans in Comapi) in exchange for all Comapi shares, with a potential consideration of £1.2m 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 £9.1m 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

		£'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 £6.2m of revenues and a profit of £0.6m 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 £10.0m of revenue and a profit of £0.4m.

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
					£'000		£'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

		Computer			Internally generated development				Domain
		software			costs				names				Totals
		£'000			£'000				£'000				£'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
		Computer			Internally generated development				Domain
		software			costs				names				Totals
		£'000			£'000				£'000				£'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.