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This Morning 11 February 2014

 

dotDigital  a company focused on software as a service (SaaS) for the likes of digital marketing has delivered its Interim results for the six months ended 31 December 2013 today.

I last had a quick look at these back in October of 2013, suggesting that they may be worth keeping an eye on.

The shares have subsequently performed well and there are certainly various aspects that catch the eye in the release this morning.

 

The first for me, is the apparent strong cash generation which sees an increase from the £6.1m reported in the preliminaries now standing at £7.3m, as net cash generated from operating activities came in at £2m.

Revenue from continuing operations showed a 32.5% jump to £7.6m against the £5.7m for the corresponding period, while its flagship email and cross-channel marketing automation platform dotMailer continues to perform strongly.

 

Monthly recurring revenues from dotMailer’s SaaS based usage charges were up 29% to £5.8m.

Some four hundred and twenty six new clients were signed up in relation to that area of the business including big names such as Skanska, Santander and Fujifilm and complements the likes of BBC Worldwide and ITV already on board.

The company certainly appears to be going the right way with a seemingly strong mix of new wins and importantly recurring revenue.

The board understandably remains upbeat adding this morning.

“Based on the strong performance at the half year to 31 December 2013 and the forward pipeline, the Board remains confident of achieving both revenue and profit expectations for 2014 and of delivering long term shareholder value.”

 

Brokers FinnCap and N+1 Singer currently forecast pre-tax profit of £3.5m for this year, giving EPS of 1.1p which implies a forward PER of 27 at the current price of 30.5p. That of course brings the old dilemma to the fore of how much are potential new investors prepared to pay for growth.

However, dotDigital is not an unproven blue sky stock, but rather is demonstrating an ability to deliver on a number of fronts.

Perhaps of particular interest is the progress made in the USA which starting from a low base appears to be expanding well and together with new products can assist further growth opportunities.

 

Last but not least, the balance sheet is strong here underpinned by a swelling cash pile.

No doubt there will be those that view this as fairly priced for now and so it might be, but dotDigital looks one to keep a close eye to me over both the medium to longer term.

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