The post-tax loss of almost £2 million, reported by Digital Marketing Group today for the year to 31 March 2010, arose after writing off £3.8 million relating mainly to the cost of past acquisitions that had been attributed to goodwill and customer relationships.   The result would have been even more depressed if the group had not benefitted from a £1.7 million settlement received from the administrator of a client for breach of a contractual obligation (see Digital Marketing Group hopeful after dull half year).

The goodwill write-offs related to the acquisition of Cheeze, Graphico, Inbox, Gasbox and Jaywing, suggesting either that the prices paid were excessive or that group restructuring initiatives have prompted premature write-downs to comply with current accounting rules.  Or both.

Whichever performance yardsticks are used, the group seems to have slipped backwards from last year.  Revenues were down 14.5% in the wake of the recession.  The operating profit margin deteriorated – whether measured before or after exceptional items, share incentive costs and amortisation charges.  Before those items, the operating margin fell from a very healthy 20.3% to a still respectable 17.1%.   After those items, there was no margin left at all. 

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