Digital Globe takes margin hit in favour of top line growth

Digital Globe Services warned that operating profits would miss forecasts even though revenues would beat forecasts thanks to winning clients in new verticals and increased volumes from existing ones.

The digital marketing specialist said it expected to deliver revenue for the year of approximately $48.0m (FY15: $40.3m), marginally ahead of market expectations

But gross profit margins were suqeezed in the second half of the year through an increase in marketing spending as the company looked to push into new industry verticals such as energy and utilities.

This will mean EBITDA is likely to be below market expectations at roughly $3.1m, with increased direct labour costs associated with the acquisition of an onshore call center to support new verticals that require on-shore fulfillment centres.

Chief executive Jeff Cox said he expects gross margin to recover to historic levels as new business matures, with an improvement during the first half of the new financial year.

He said he was pleased with the overall growth of the business and encouraged by new contracts won towards the end of the fiscal year.

"We have made additional investments in infrastructure and technology that enables us to remain a leading provider of customers for our brand partners."

Shares in the company fell 26% to 56.5p not long before the close on Thursday.