MIDAS SHARE TIPS UPDATE: Sales message firm Dotdigital nets a slice of profit

Pepperoni pizza is the UK’s favourite takeaway and Thursday evening is the most popular time to order. Mondays and Tuesdays are far slower. No surprise then, that these are the days when customers are deluged with promotional emails or texts. Unwanted, annoying and intrusive, these messages can often irritate as many pizza-lovers as they attract.

Dotdigital aims to make the process more personal, to the benefit of businesses and consumers. The company has developed sophisticated technology that helps firms to understand their customers better so they can communicate more effectively online and in real life.

The group works with more than 4,000 organisations worldwide, from carmaker Volkswagen to English Heritage and from Papa Johns pizza to the NHS. Charities subscribe to Dotdigital’s software too, including Guide Dogs for the Blind, which uses the kit to match dogs with the right owners.

Chief executive Milan Patel has recently developed an artificial intelligence tool as well, WinstonAI, which can check marketing material to ensure it makes sense, convert emails to texts and sift through data so that consumers receive messages that they are interested in pursuing.

Revenues soared during the pandemic, as the company benefited from a surge in online shopping and its technology was used to send out vaccine reminders and other pandemic-related updates.

Tasty: Dotdigital has developed sophisticated technology that helps firms to understand their customers better so they can communicate more effectively online and in real life

Patel warned investors that growth rates would subside, but when they did, the market response was brutal, exacerbated by early-stage growth pains in the US, the chairman’s resignation on health grounds, and the finance director leaving to pursue other interests.

The shares plunged from £2.87 in 2021 to just 65p last summer. They have recovered to 88p since then, but should have further to go. Results for the year to June, announced last week, were encouraging. Revenues rose 10 per cent to £69 million, profits were 6 per cent higher at £15.4 million and the dividend was increased from 0.98p to 1p.

A new finance director is in place and there is a new chairman, John Conoley, who began his career at IBM in the 1980s. US growth is back on track and the firm is expanding in Europe and Asia too.

Brokers expect strong growth in sales, profits and dividends, as companies focus marketing expenditure on digital channels, such as emails and texts, where they can monitor success. Research indicates that for every £1 Dotdigital customers spend with the company, they generate returns of more than £4 through cost savings and profits over three years.

The group is also a leader in its field, invests consistently in research and development and is constantly on the lookout for acquisitions that will broaden its appeal to customers.

Midas verdict: Midas recommended Dotdigital in 2015, when the stock was 37p. Recent times have been tough but Patel has maintained a steady hand on the tiller and prospects are bright. At 88p, the shares offer good value.

Traded on: AIM Ticker: DOTD Contact: dotdigitalgroup.com or 020 3953 3072

This post first appeared on Dailymail.co.uk