TIDMZOO
RNS Number : 2478W
Zoo Digital Group PLC
13 November 2017
13 November 2017
ZOO DIGITAL GROUP PLC
("ZOO", "the Group" or "the Company")
Interim Results
ZOO Digital Group plc, the provider of localisation and digital
distribution services for the global entertainment industry, today
announces its unaudited financial results for the six months ended
30 September 2017.
HIGHLIGHTS
Operational highlights
-- Launched a new cloud-powered dubbing service to critical
acclaim by international trade organisations
-- Successfully completed and delivered first dubbing projects
for a global entertainment client
-- Launched a cloud-powered scripting service, a cornerstone
capability enabling ZOO to process combined subtitling and dubbing
assignments efficiently
-- Client concentration further reduced, with largest client
contributing 28% of sales (H1 2016: 47%)
-- Added three new affiliates, expanding the network of partners to 10 across emerging markets
-- Board strengthened by the appointment of Mickey Kalifa as
Non-Executive Director - a finance professional with experience of
the technology, media and gaming sectors
Key Financials
-- Revenues increased by 63% to $12.7m (H1 2016: $7.8m)
-- Adjusted EBITDA(1) up by 34% to $1.3m (H1 2016: $1.0m), with
significant investments made during the period in new staff and
higher costs of initial dubbing projects
-- Fundraise generated GBP2.6m cash and capitalised a further GBP1.1m of debt
-- Net debt reduced to $3.9m (H1 2016 $6.2m)
Stuart Green, CEO of ZOO Digital, commented, "I am pleased to be
able to report on a strong performance for the Group, with
significant progress made in all facets of the business. The first
half of the year has seen further operational improvements,
highlighted by strong demand and very positive critical
recognition, a strengthening of the Group's balance sheet and
adding expertise to the Board of Directors. This is reflected in a
much-improved financial performance, with the foundations laid for
enhanced performance in future periods, and the confidence of
management to invest for growth.
"Trading in the second half of the year has begun well, with
revenue expectations ahead of market guidance, balanced against our
increasing investment to satisfy increasing demand and support
future growth. The Board remains confident of meeting its full year
management expectations for adjusted EBITDA and is excited for the
Group's future."
(1) Adjusted for share-based payments.
For further enquiries please contact:
ZOO Digital Group plc 0114 241 3700
Stuart Green - Chief Executive Officer
Helen Gilder - Chief Finance Officer
finnCap 020 7220 0500
Henrik Persson / Emily Watts / Alex
Price (corporate finance)
Camille Gochez (corporate broking)
Alma PR 020 8004 4218
Josh Royston / Hilary Buchanan
About ZOO Digital Group plc:
ZOO Digital is a provider of services allowing quality TV and
movie content to be subtitled and dubbed in any language and
prepared for sale with all major online retailers. ZOO's clients
are some of the best-known brands in the world including major
Hollywood studios, global broadcasters and independent
distributors.
ZOO's point of difference in the marketplace is its development
and use of innovative cloud technology. This ensures that content
is subtitled in any language and delivered to all the major online
platforms such as Amazon, iTunes, Google and Hulu with reduced time
to market, higher quality and lower costs. ZOO's agile, cloud-based
business model enables clients to respond to market trends, scale
easily with business growth and capitalise on new routes to market
in the fast moving and evolving digital industry.
ZOO operates from the entertainment hubs of Los Angeles and
London with a development and production centre in Sheffield. Its
full-service proposition includes digital distribution, subtitling
& captioning, metadata creation & localisation, dubbing,
artwork localisation, workflow and asset management.
www.zoodigital.com
Chairman and Chief Executive's Review
Overview
We are pleased to be able to report on a strong performance for
the Group, with significant progress made in all facets of the
business. The first half of the year has seen further operational
improvements, highlighted by strong demand and very positive
critical recognition, a strengthening of the Group's balance sheet
and adding expertise to the Board of Directors. This is reflected
in a much-improved financial performance, with the foundations laid
for enhanced performance in future periods.
Financial Results
Revenues of $12.7 million represent a 63% increase over the
corresponding period last year (H1 2016: $7.8 million). This top
line growth has largely been driven by the increasing proportion of
revenue derived from our proprietary localisation services,
predominantly subtitling delivered using ZOOsubs, but also from the
first projects processed using ZOOdubs, our new dubbing platform.
This has an impact on gross margin, which is net of external cost
of sales (predominantly freelance translators), in two ways.
Localisation services incur higher costs of sale than both software
licensing and digital distribution services, and in addition, the
Group incurred exceptional costs of processing its first dubbing
projects in the course of validating the operation of early-stage
software. As a result, gross margin in the period reduced to 63%
(H1 2016: 75%). The projects were completed successfully and as the
ZOOdubs platform is developed further, efficiency of dubbing
operations will improve.
Adjusted EBITDA for the six months improved by 34% to $1.3
million (H1 2016: $1.0 million), reflecting significant investments
during the period in new staff and exceptional costs associated
with the establishment and quality control of our new dubbing
software and services.
Another pleasing trend in these results is the broadening of our
customer base and the diversification of our revenues, with the
proportion coming from our largest single customer reducing further
during the period to 28% (H1 2016: 47%).
Operations
The principal focus of the Group has been on the continuing
progress of our localisation services delivered through our
proprietary cloud-based platforms, ZOOsubs and ZOOdubs, for the
provision of subtitling and dubbing services respectively. After a
period of research and development and building a pipeline for
ZOOsubs, it has been reassuring to witness its growing adoption and
demand from customers, both existing and new. As well as helping to
reduce seasonality within the business, it has enhanced ZOO's
reputation for innovation within the marketplace and driven strong
revenue growth. There has been additional recruitment of talent and
the Group now has a network of almost 3,000 freelance translators
who are able to collaborate efficiently with us on projects to
satisfy an ever-growing pipeline of demand.
ZOOdubs was officially launched at the start of the period under
review at the National Association of Broadcasters show in Las
Vegas on 22 April 2017 to critical acclaim, awarded a 'Best in
Show' accolade by TV Technology and subsequently an IABM award for
Design and Innovation at the International Broadcast Convention in
Amsterdam. Helped by our success in subtitling, ZOOdubs has quickly
developed strong levels of interest given that it solves a more
complex and costly problem for content owners. Our software
provides a systematic and truly multi-lingual solution for dubbing
services which significantly reduces the need for both expensive,
high tech equipment and the associated technical operators. As such
it has been imperative to ensure an exceptional quality of service
and we were delighted that the first projects, delivered in nine
different languages, received extremely positive feedback from the
client who was particularly impressed with the quality and speed of
completion.
We have been cautious to build out demand for ZOOdubs at the
right pace, with rigorous testing, high levels of verification and
relatively high levels of human involvement during the software's
nascency. This will continue through the remainder of this
financial year as the software becomes more developed and
established, with ongoing R&D investment to broaden its
capability. The foundations are being laid now to build a scalable
technological and service capability to satisfy client demand so
that the operational gearing of the business will be seen in future
periods.
The Group is investing in its software and operational
capability to support rapid growth, and is currently in the next
phase of commercialisation of our dubbing service delivered using
ZOOdubs. This is a programme to identify, select, train and engage
freelance dubbing directors, voice actors and audio mixers in order
to ensure that talent is available to scale sufficiently to meet
the growing levels of demand. Again, this is similar to our
experience with ZOOsubs and will help us to be more effective and
efficient than our competitors. This can be evidenced in the
progress we have made in recruiting further freelance audio-visual
translators, required to fulfil both subtitling and dubbing
services, aided by the expansion of our on-boarding team.
In the traditional entertainment localisation ecosystem,
subtitling and dubbing work have followed two detached work streams
from the point of inception, which tends to lead to a duplication
of work and inconsistencies in translation across the two
approaches which are crafted independently. ZOO's latest innovation
is a cloud-powered scripting service which is a cornerstone
capability that will enable the Company to process combined
subtitling and dubbing assignments consistently, providing our
customers with further efficiency and greater control. We look
forward to providing an update on progress in due course.
Another important operational development in the period was that
our new Sheffield facility received security accreditation from the
Content Delivery and Security Association, a key endorsement
required by some of our existing and target clients.
Affiliate Network
During the first six months, the Group has been successful in
adding three new affiliates in emerging markets, bringing the
growing network to a current total of 10. These are Studio Ares in
Turkey, Bossdom in Taiwan, and WhatSub Pro in South Korea. Our
affiliates are all trained in the use of ZOO's cloud systems and,
therefore, provide us with additional capacity to meet client
demand as well as access to skilled linguists, dubbing directors
and voice actors in the territories in which they deliver services
to their own networks of clients. We look forward to building out
this network further and working closely with our chosen
partners.
Fundraise
On 18 April 2017, a Placing was announced to raise GBP2.6
million of additional funds whilst at the same time capitalising
GBP1.1 million of debt, strengthening the Balance Sheet. The funds
are being used to accelerate organic growth and the benefits are
already being seen. The Placing also presented the opportunity to
welcome new institutions to the register of shareholders.
Subsequent to the fundraise, net debt in the period has reduced to
$3.9m (H1 2016 $6.2m).
Board Appointment
On 5 October 2017, Mickey Kalifa was appointed as a
Non-Executive on the Board of Directors. Mickey is a Chartered
Accountant with nearly 30 years' experience across the technology,
media and gaming sectors. Previously, Mickey spent eight years with
Sportech PLC ("Sportech"), latterly as Chief Financial Officer
where he led a transformation in the company's financial strength
and played a prominent role in driving Sportech's global expansion.
Prior to Sportech, Mickey served in a number of executive and
finance director roles with some of the world's largest media and
technology companies, including Liberty Global, BSkyB PLC, Time
Warner, Disney and Young and Rubicam.
As well as welcoming Mickey, we would like to thank all of our
staff, our growing network of translators and our shareholders,
both existing and new, for their continuing support in these
exciting times.
Outlook
Trading in the second half of the year has begun well, with
revenue expectations ahead of market guidance, balanced against our
increasing investment in R&D and localisation operations which
we are making to support our future growth. We continue to manage
our costs prudently in line with our growth and our working
capital. The pipeline for subtitling work continues to be
consistently strong; while there is ever-growing evidence of the
significant opportunity available in dubbing, both of which give us
continued confidence in achieving on-going strong organic growth.
As ZOOdubs continues to mature, so too will the associated net
margins, which we would expect to see to a meaningful degree in
future periods. The Board is encouraged with its trading in the
period to date, remaining confident of meeting its full year
management expectations for adjusted EBITDA, and is excited for the
Group's future.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
for the six months ended 30 September 2017
6 months 6 months
to to Year ended
30 Sep 30 Sep 31 Mar
2017 2016 2017
$000 $000 $000
================================ ========= ========= ===========
Revenue 12,726 7,804 16,488
Cost of sales (4,668) (1,952) (4,483)
-------------------------------- --------- --------- -----------
Gross Profit 8,058 5,852 12,005
Other operating income - 74 196
Operating expenses (7,645) (5,613) (11,699)
Operating profit 413 313 502
Analysed as
EBITDA before share-based
payments 1,339 996 1,780
Share based payments (191) (7) (11)
Depreciation (222) (114) (259)
Amortisation and impairment (513) (562) (1,008)
-------------------------------- --------- --------- -----------
413 313 502
-------------------------------- --------- --------- -----------
Exchange (loss)/gain on
borrowings (184) 399 624
Conversion of convertible
loan note (145) - -
Finance cost (221) (291) (591)
-------------------------------- --------- --------- -----------
Total finance cost (550) 108 33
-------------------------------- --------- --------- -----------
(Loss)/Profit before taxation (137) 421 535
Tax credit 222 256 256
-------------------------------- --------- --------- -----------
Profit and total comprehensive
income for the period
attributable to equity
holders of the parent 85 677 791
-------------------------------- --------- --------- -----------
Profit per ordinary share
-------------------------------- --------- --------- -----------
0.13 2.07 2.42
- basic cents cents cents
-------------------------------- --------- --------- -----------
0.11 2.07 2.42
- diluted cents cents cents
-------------------------------- --------- --------- -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 30 September 2017
As at As at As at
30 Sep 30 Sep 31 Mar
2017 2016 2017
$000 $000 $000
-------------------------------- --------- --------- ---------
ASSETS
Non-current assets
Property, plant and equipment 1,034 359 1,073
Intangible assets 6,671 7,134 6,915
Deferred income tax assets 486 486 486
-------------------------------- --------- --------- ---------
8,191 7,979 8,474
-------------------------------- --------- --------- ---------
Current assets
Trade and other receivables 7,100 3,722 3,753
Cash and cash equivalents 722 328 607
-------------------------------- --------- --------- ---------
7,822 4,050 4,360
-------------------------------- --------- --------- ---------
Total assets 16,013 12,029 12,834
-------------------------------- --------- --------- ---------
LIABILITIES
Current liabilities
Trade and other payables (3,977) (3,016) (4,045)
Borrowings (734) (1,466) (4,102)
-------------------------------- --------- --------- ---------
(4,711) (4,482) (8,147)
-------------------------------- --------- --------- ---------
Non-current liabilities
Borrowings (3,912) (5,097) (2,126)
-------------------------------- --------- --------- ---------
Total liabilities (8,623) (9,579) (10,273)
-------------------------------- --------- --------- ---------
Net assets 7,390 2,450 2,561
-------------------------------- --------- --------- ---------
EQUITY
Equity attributable to equity
holders of the parent
Called up share capital 1,010 7,236 7,236
Share premium reserve 41,033 37,014 37,007
Other reserves 12,320 12,320 12,320
Share option reserve 519 324 328
Capital redemption reserve 6,753 - -
Convertible loan note reserve 42 42 42
Foreign exchange translation
reserve (992) (992) (992)
Accumulated losses (53,275) (53,474) (53,360)
-------------------------------- --------- --------- ---------
7,410 2,470 2,581
-------------------------------- --------- --------- ---------
Interest in own shares (20) (20) (20)
-------------------------------- ---------
Attributable to equity holders 7,390 2,450 2,561
-------------------------------- --------- --------- ---------
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
(UNAUDITED)
for the six months ended
30 September 2017
Foreign Convertible Interest
Share exchange loan Share Capital in
Ordinary premium translation note option redemption Other Accumu-lated own
shares reserve reserve reserve reserve reserve reserves losses shares Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
--------------- --------- -------- ------------- ------------ -------- ----------- --------- ------------- --------- ------
Balance
at
1 April
2016 7,236 37,014 (992) 42 317 - 12,320 (54,151) (20) 1,766
Share-based
payments 7 7
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Transactions
with owners - - - - 7 - - - - 7
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Profit
for the
period 677 677
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Total
comprehensive
income
for the
period - - - - - - - 677 - 677
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Balance
at
30 September
2016 7,236 37,014 (992) 42 324 12,320 (53,474) (20) 2,450
Share-based
payments (7) 4 (3)
Transactions
with owners - (7) - - 4 - - - - (3)
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Profit
for the
period 114 114
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Total
comprehensive
income
for the
period - - - - - - - 114 - 114
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Balance
at
31 March
2017 7,236 37,007 (992) 42 328 - 12,320 (53,360) (20) 2,561
Deferred
shares (6,753) 6,753 -
Conversion
of loan
note 145 145
Share-based
payments 191 191
Issue of
share capital 527 3,881 4,408
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Transactions
with owners (6,226) 4,026 - - 191 6,753 - - - 4,744
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Profit
for the
period 85 85
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Total
comprehensive
income
for the
period - - - - - - - 85 - 85
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
Balance
at
30 September
2017 1,010 41,033 (992) 42 519 6,753 12,320 (53,275) (20) 7,390
=============== ========= ======== ============= ============ ======== =========== ========= ============= ========= ======
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
for the six months ended 30 September 2017
6 months 6 months Year
to to ended
30 Sep 30 Sep 31 Mar
2017 2016 2017
$000 $000 $000
============================== ========= ========= ========
Cash flows from operating
activities
Operating profit for the
period 413 313 502
Depreciation 222 114 259
Amortisation and impairment 513 562 1,008
Share based payments 191 7 11
Disposal of property, plant
and equipment - - 1
Changes in working capital:
Increases in trade and
other receivables (3,347) (1,191) (1,222)
(Decreases)/increases in
trade and other payables (68) (80) 949
------------------------------ --------- --------- --------
Cash flow from operations (2,076) (275) 1,508
Tax received 222 256 256
------------------------------ ---------
Net cash flow from operating
activities (1,854) (19) 1,764
------------------------------ --------- --------- --------
Investing Activities
Purchase of intangible
assets (269) (314) (541)
Purchase of property, plant
and equipment (183) (40) (168)
------------------------------ ---------
Net cash flow from investing
activities (452) (354) (709)
------------------------------ --------- --------- --------
Cash flows from financing
activities
Repayment of borrowings (392) (66) (164)
Proceeds from borrowings 93 688 -
Finance cost (267) (235) (591)
Issue of Share Capital
(net of costs of issue) 2,987 - (7)
------------------------------
Net cash flow from financing 2,421 387 (762)
------------------------------ --------- --------- --------
Net increase in cash and
cash equivalents 115 14 293
------------------------------ --------- --------- --------
Cash and cash equivalents
at the beginning of the
period 607 314 314
------------------------------ --------- --------- --------
Cash and cash equivalents
at the end of the period 722 328 607
------------------------------ --------- --------- --------
NOTES
General information
ZOO Digital Group plc ('the Company') and its subsidiaries
(together 'the Group') provide productivity tools and services for
digital content authoring, video post-production and localisation
for entertainment and packaging markets and continue with on-going
research and development in those areas. The Group has operations
in both the UK and US.
The Company is a public limited company which is listed on the
Alternative Investment Market and is incorporated and domiciled in
the UK. The address of the registered office is 7(th) Floor, City
Gate, 8 St Mary's Gate, Sheffield. The registered number of the
Company is 3858881.
This condensed consolidated financial information is presented
in US dollars, the currency of the primary economic environment in
which the Company operates.
The interim accounts were approved by the board of directors on
10 November 2017.
This consolidated interim financial information has not been
audited.
Basis of preparation
The consolidated financial statements of ZOO Digital Group plc
and its subsidiary undertakings for the period ended 31 March 2018
will be prepared in accordance with International Financial
Reporting Standards ("IFRS"), as adopted by the European Union, and
with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
This Interim Report has been prepared in accordance with UK AIM
listing rules which require it to be presented and prepared in a
form consistent with that which will be adopted in the annual
accounts having regard to the accounting standards applicable to
such accounts. It has not been prepared in accordance with IAS 34
"Interim Financial Reporting".
The policies applied are consistent with those set out in the
annual report for the year ended 31 March 2017, and have been
consistently applied, unless stated otherwise.
A copy of the statutory accounts for the year ended 31 March
2017, prepared under IFRS, has been delivered to the Registrar of
companies and contained an unqualified auditors' report.
Basis of Consolidation
The consolidated financial statements of ZOO Digital Group plc
include the results of the Company and its subsidiaries. Subsidiary
accounting policies are amended where necessary to ensure
consistency within the Group and intra group transactions are
eliminated on consolidation.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
US Dollars which is the Company's functional and presentation
currency.
Transactions and balances
Transactions in foreign currencies are recorded at the
prevailing rate of exchange in the month of the transaction.
Foreign exchange gains or losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at the year-end
exchange rates are recognised in the income statement.
Group companies
The results and financial positions of all Group entities that
use a functional currency different from the presentation currency
are translated into the presentation currency as follows:
-- assets and liabilities for each entity are translated at the
closing rate at the period end date;
-- income and expenses for each Statement of Comprehensive
Income are translated at the prevailing monthly exchange rate for
the month in which the income or expense arose and all resulting
exchange rate differences are recognised in other comprehensive
income with the foreign exchange translation reserve.
Equity securities issued
On 18 April 2017, it was announced that the company proposed to
raise gross funds of approximately GBP2.58m ($3.33m) through a
placing and subscription comprising the issue of 28,611,111 new
ordinary shares at 9p per share. It was further announced that
12,222,223 shares would be issued in return for the conversion of
the GBP600,000 outstanding loan from Sara Green, the wife of Dr
Stuart A Green, and the conversion of GBP500,000 of convertible
loan note and that the remaining GBP2.57m of convertible loan note
be extended to mature on 31 October 2020. This transaction was
approved in a shareholder meeting held on 4 May 2017.
No securities were issued during the periods ended 30 September
2016 or 31 March 2017.
Earnings per share
Earnings per share is calculated based upon the profit or loss
on ordinary activities after tax for each period divided by the
weighted average number of shares in issue during the period.
Weighted average number
of shares for basic
& diluted profit per 30 Sep 30 Sep 31 Mar
share 2017 2016 2017
========================
No. of shares No. of shares No. of shares
======================== ============== ============== ==============
Basic 66,309,079 32,660,660 32,660,660
Diluted 78,909,632 42,647,881 42,690,381
At 30 September 2016 and 31 March 2017, the basic and diluted
earnings per share were the same due to the average share price
during the period being lower than the conversion price or the
exercise prices of the convertible loan note and share options.
Further Copies
Copies of the Interim Report for the six months ended 30
September 2017 will be available, free of charge, for a period of
one month from the registered office of the Company at 7(th) Floor,
City Gate, 8 St Mary's Gate, Sheffield, S1 4LW or from the Group's
website: www.zoodigital.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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