Digital Marketing Group

Online marketing agency Digital Marketing Group (DMG) reported a decline in revenue for the year to March amid a drop in sales from financial services customers.

Adjusted pre-tax profits slipped 10% to £7.2m on a 14.5% fall in revenues to £48.5m, with chief executive Ben Langdon noting that 'none of the major financial services brands undertook substantial initiatives in the data services area' during what Langdon describes as 'the worst economic environment for generations'.

Following a bout of consolidation, AIM-quoted DMG, whose clients include HSBC and Alliance & Leicester, now has two main divisions: 20:20, a creative agency and research firm purchased in December for £2m and DMG, a specialist in online and direct marketing as well as data services. Though revenues fell in both divisions, DMG was particularly hard hit, with sales falling 29% to £21.3m as demand for data analytics work from financial services clients waned.

Going forwards, DMG has high hopes for its eCommerce operation, which grew profits 52% to £1.57m last year, is developing iPhone applications for brands including Hula Hoops and Bounty and recently clinched contracts to develop viral campaigns for bookmaker William Hill and digital TV provider freesat.

Langdon is decidedly cautious about the future, remarking that 'the market appeared to be picking up pre-election, however things have now slowed' and house broker Cenkos now forecasts reduced pre-tax profits of £6m and lower earnings of 5.1p.

With the full impact of the recession on the marketing industry still unclear, DMG shares, recommended by Growth Company Investor at 39p last August, could come under some short-term pressure. As such, it may be worth reducing holdings for the time being, whilst retaining a significant rump for a return to strong growth.