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Full year results for e-marketing specialist dotDigital (LON:DOTD) are set to beat market expectations, the company revealed.
The company told investors that earnings for the twelve months to June 30 will slightly exceed current market forecasts of £4.3mln, when the group’s final results are released in October.
Strong organic growth for dotMailer, the group’s core offering, which features high margins and long-term recurring revenues, is the main driver for the better-than-expected performance, dotDigital said.
Revenues generated within the core products division grew 32% to £16.1mln, up from £12.2mln in 2013, while total group revenues grew to £16.4mln.
dotDigital says its business continues to be highly cash generative. It ended the financial year with £9.3mln, which is a 52% improvement on the preceding twelve months. The company also highlighted that it remains free of debt finance.
"This strong performance is again extremely encouraging and illustrates that our organic growth strategy is working,” chief executive Peter Simmonds said. “We look forward to providing a full update on the year’s trading together with greater detail on our future growth plans when we announce our full year results in October.”
dotDigital intends to continue investments into the organic growth of the core email marketing business, focusing on fast growing medium sized businesses and corporate clients.
It says this strategy has driven a 35% increase in monthly spend per client, and client retention means the business is seeing significantly higher client lifetime values.
At the same time marketing initiatives to build the company’s presence in the United States are now beginning to deliver a strong pipeline of new clients; in the coming year this will be a core focus.
A new re-brand of the dotMailer platform has been launched, coinciding with the company’s 15 year anniversary.
New features, involving ‘big data’ and automation, have been added to the platform and dotDigital believes this will open up new sales opportunities as well as enhancing revenues from existing clients.
Rounding off the encouraging update dotDigital said demand for email marketing and automation remains strong both in the UK and internationally and the dotMailer platform is well placed to generate strong organic growth over the coming year.
Tintin Stormont, analyst at N+1 Singer, in a note, said: “We believe the performance is particularly impressive when taken in the context of the significant extra investment for future growth which has been undertaken in the year.
“We expect the benefits of this investment to be realised in the coming years resulting in 65% and 56% pre-tax profit growth in FY’15 and FY’16 respectively.”
Stormont says dotdigital’s year-end cash position of £9.3mln was ahead of the N+1 Singer’s forecast of £7.3mln.
The increased focus on mid-market customers has been a driver in the improving performance, according to Stormont.
“The group has successfully completed a dotMailer re-branding initiative which incorporates a refresh of the dotMailer platform, release of powerful new features and the launch of a new marketing website.
“The re-branding initiative gives dotMailer a more clean, enterprise feel. Branding aimed at less sophisticated SME’s, such as cartoons, has been removed leaving a product more attuned to the mid-market/enterprise space.
“The re-branding highlights the dotDigital strategy of focusing on fast growing mid-market businesses and enterprise clients. These clients are more attractive to the group with typically higher average spends and better retention rates.”