Dotdigital warns of slowdown in growth in wake of pandemic

Marketing and customer engagement software company Dotdigital Group reported a 10% improvement in organic revenue in its interim results on Thursday, to £30.9m, although its shares were sliding as it warned of a slowdown in growth going forward.

The AIM-traded firm said recurring revenue as a percentage of total revenue improved to 94% for the six months ended 31 December, from 93% at the end of June.

Monthly average revenue per customer was 19% higher at £1,422, while adjusted EBITDA grew 17% to £12.2m, and adjusted operating profit also added 17% to £8.9m.

The board said research and development was underpinning its growth strategy, with recurring revenues from enhanced product functionality growing 22% to £10.8m.

Dotdigital reported a “strong” net cash balance at period end of £40.0m, up from £32m on 30 June.

Looking ahead, Dotdigital said it was looking at an “unwinding” of customer buying behaviour in the post-lockdown environment, with reduced growth in demand for SMS, and macroeconomic headwinds affecting international activities.

The board said it now anticipated full-year revenue growth to be slower than previous expectations during the current and future financial years.

Dotdigital said it was “committed” to investing in its people and its culture in an “increasingly competitive” global labour market, to continue to achieve year-on-year revenue growth.

“The group delivered a first half performance of strong growth and profitability driven by new customer wins and expanded use of the platform across the existing customer base,” said chief executive officer Milan Patel.

“Our consistent strategy continues to support our growth ambition in what is a significant market opportunity.”

Patel said that although it appeared that the worst of the pandemic was over, he added that it triggered a “dramatic acceleration” in the adoption of digital marketing, with the strength of Dotdigital’s platform putting it in an “ideal position” to benefit from the trend.

“Whilst we continue to navigate through market challenges, particularly related to hiring, and adjust to a post-lockdown environment, the board is committed to investing in our teams in line with the growth opportunity available, supported by a strong financial position and recurring software-as-a-service (SaaS) business model.”

At 1401 GMT, shares in Dotdigital Group were down 51.01% at 73.2p.