TIDMZOO
RNS Number : 1609T
Zoo Digital Group PLC
02 July 2018
2 July 2018
ZOO DIGITAL GROUP PLC
("ZOO" or "the Group")
FINAL RESULTS FOR THE YEARED 31 MARCH 2018
ZOO Digital Group plc, the provider of cloud-based localisation
and digital distribution services for the global entertainment
industry, today announces its audited financial results for the
year ended 31 March 2018.
HIGHLIGHTS
Key Financials
-- Revenue increased by 73% to $28.6 million (2017: $16.5 million)
-- Adjusted EBITDA* increased by 35% to $2.4 million (2017: $1.8 million)
-- Operating profit increased to $0.6m (2017: $0.5m)
-- Reported Loss Before Tax of $5.0m (2017: profit $0.5m)
-- Adjusted Profit Before Tax increased to $0.5 million (2017: loss of $0.1 million)
Operational highlights
-- Growing adoption and demand for subtitling services, with
revenue almost doubling in the year
-- Successful launch of industry's first cloud-based dubbing
service, with good uptake from existing and new customers
-- Growing international network of over 4,000 international
freelancers and 8 affiliates across 10 locations
-- Ongoing supportive market dynamics, with the increase in
digital entertainment content and expansion of distribution
channels driving a growing demand for high quality and scalable
content localisation and digital packaging services
* Adjusted for share-based payments
Adjusted for share-based payments, exchange loss/gain on
borrowings, conversion of loan into equity and finance cost of
embedded derivative
Copies of the Report and Accounts for the year ended 31 March
2018 are available to view on the Group's website
www.zoodigital.com.
Stuart Green, CEO of ZOO Digital, commented,
"This has been another extremely successful year for the Group,
delivering considerable revenue growth while expanding our
offering. It is clear that we are operating in a market which is
right for our approach, where our technological innovation can
facilitate greater scalability for all of our client groups.
"ZOO is increasingly viewed as a significant player in the media
localisation market, and with the introduction of dubbing we have
achieved a key milestone on our journey towards becoming a one stop
shop for all media localisation and digital packaging services
across all languages. Through the development of our innovative
technology, we are facilitating the ongoing disruption and growth
of the digital entertainment market and we will continue to invest
in innovation, quality and security to ensure we remain at the
forefront of our industry.
"Our sales pipeline continues to grow across our offerings, both
from existing and new customers, giving us confidence in achieving
on-going organic growth. With a strengthened balance sheet,
enlarged commercial team and augmented offering, we look to the
future with confidence."
For further enquiries please contact:
ZOO Digital Group plc 0114 241 3700
Stuart Green - Chief Executive Officer
Helen Gilder - Chief Finance Officer
finnCap Ltd
Henrik Persson / Emily Watts (corporate
finance)
Camille Gochez / Andrew Burdis (corporate
broking) 020 7220 0500
Alma PR
Josh Royston / Caroline Forde / Helena
Bogle 0778 090 1979
The Company further wishes to draw attention to the posting on
its website (www.zoodigital.com) of a presentation to shareholders
regarding its final results.
CHAIRMAN'S STATEMENT
The Board is very pleased with the excellent progress made by
the Company in the execution of its strategy to become one of the
leading providers of software-driven localisation services for
movie, TV and video content around the world.
A 73% increase in revenues to $28.6 million from some of the
world's largest entertainment content creators and distributors has
been accompanied by investments in innovative new service
offerings, international expansion, and translation capacity,
resulting in an increase of EBITDA before share based payments to
$2.4 million (2017: $1.8 million).
With strong underlying market drivers in its favour, demand for
ZOO's subtitling services has constituted the largest part of its
revenue growth, and the Board is confident in the long term revenue
and profit opportunity from this segment. However, 2017-18 also saw
the introduction of ZOO's new dubbing service, and initial customer
acceptance of this exceeded expectations. This opens up a
significant new axis of growth for the company, since it finds
customers valuing the ability to deliver a 'one stop shop' for all
localisation and digital packaging services worldwide. We therefore
plan to make further investments in both dubbing and subtitling
offerings to capitalise on ZOO's position as a preferred vendor to
many of the leading names in an industry undergoing unprecedented
growth and upheaval.
We are also delighted that ZOO was able to strengthen its
balance sheet early in the financial year, thanks to the investment
of GBP2.6 million in new equity by existing and new shareholders
and the conversion of GBP1.1 million of existing debt into equity.
Combined with the cash generation from operations, this has put the
company in a very strong position to exploit the large market
opportunity which is described in more detail in the CEO
report.
The Board is conscious of the need to develop the Company's
governance and management structures to cope with the demands of a
larger listed entity, so was pleased to welcome Mickey Kalifa as a
non-executive director in October 2017. Mickey is a Chartered
Accountant with nearly 30 years' experience across the technology,
media and gaming sectors. He was appointed Chief Executive Officer
of the betPawa Group in May 2018. Previously he spent eight years
with Sportech PLC, 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. The Board
has also decided to adopt the new QCA Corporate Governance Code
with immediate effect, rather than wait until the date next year
when the changes to AIM rules would have required the adoption of
such a formal governance code.
Our long-serving CFO Helen Gilder decided to resign for personal
reasons early in 2018, and, as separately announced today, I am
pleased to welcome Phill Blundell as Helen's replacement, who
starts work for us during July 2018. Phill joins ZOO with a strong
pedigree in senior finance and operational roles within UK
technology public companies, including DotDigital Group plc, Eagle
Eye Solutions Group plc and Intelligent Environments plc. He has
over 20 years' experience building strong software businesses
through product innovation and global strategic partnerships.
Phillip qualified as a Chartered Accountant with Coopers &
Lybrand, now part of PwC. The Board warmly thanks Helen for her
many years of loyal service and wishes her every success for the
future.
The progress achieved by ZOO has resulted from a lot of
sustained hard work by ZOO's staff and the patient support of our
stakeholders. However, the Board believes it represents just the
start of an exciting period for ZOO: it can combine the power of
cloud computing with its deep understanding and experience of the
industry to create a highly valuable company which provides
localisation and digital packaging services to many of the world's
leading creators and distributors of film and TV entertainment.
Following the fundraising at the start of the year, and with strong
cash generation during it, the business enters the new year on a
solid financial footing and with confidence in its future
success.
Roger D Jeynes
Chairman
ZOO Digital Group plc
STRATEGIC REPORT
Introduction
I am pleased to report that the year saw the continuation of the
considerable progress achieved in the prior period. Revenue for the
year increased by 73% to $28.6 million (2017: $16.5 million),
earnings before interest, tax, depreciation and amortisation
(EBITDA) adjusted for share-based payments grew by 35% to $2.4
million (2017: $1.8 million). The successful launch of our dubbing
service at the end of the first half of the year was a major
milestone adding a powerful second arm to our growth strategy and
provides us with the opportunity to become a 'one-stop-shop' for
localisation services, although having a short term downward impact
on profit margins.
Strategy
ZOO's services allow TV and movie content to be subtitled and
dubbed in any language and prepared for sale with all major online
retailers as well as on optical disc formats. ZOO's strategy is to
develop and employ innovative, proprietary cloud-based software
technology to deliver localisation services to entertainment
content owners that will enable them to capitalise on the growing
consumer demand for digital content. ZOO's software enables the
Company to collaborate with a worldwide network of thousands of
freelance workers, such as translators, voice actors and dubbing
directors, and to significantly reduce the human capital
requirements of service fulfilment, enabling the Company to scale
its capacity efficiently as demand increases.
ZOO's innovative use of technology enables content owners to
distribute their products to additional territories at a faster
speed-to-market and lower cost than has previously been possible,
and with a consistently high level of quality. The clear benefits
delivered by the Company's differentiated proposition have driven
significant organic growth in sales, leading to ZOO being named in
March 2018 as the organic growth leader in global localisation
services by language services market research specialist
Nimdzi.
Market Opportunity
The transition towards digital consumption of entertainment has
been the greatest single change to the industry in modern times
and, now that this form of delivery has been widely welcomed and
adopted by the mass market, it is difficult to envisage such a
cultural change again any time soon. It is now easier for content
owners to reach a much wider audience through digital rather than
physical products as the supply chain is simplified.
Consequently, content has become commercially available in more
and more geographies, and as the territorial reach increases so too
does the need for subtitling and dubbing into additional languages.
A TV series that was previously translated into fewer than ten
major European languages will now potentially be translated into 30
or more global languages, which increases the scope of work for
ZOO.
The global home entertainment market reached c.$48bn in 2017,
with digital distribution accounting for 66% of that spend. Since
2012 around 200 over-the-top (OTT) platforms providing streamed and
downloadable content have emerged, with the number of subscribers
to streaming services globally reaching 447 million in 2017.
Investment by OTT operators in new original content reached $13bn
in 2017, with growth expected to continue as providers commit to
increased future spending.
The increase in digital entertainment content, the expansion of
distribution channels and disruptive innovation in the sector by
vendors such as Amazon, Hulu, Apple and Google are all combining to
drive a growing demand for high quality and scalable content
localisation services. ZOO's technology is a powerful
differentiator and we believe provides us with the means to
capitalise on the long-term growth opportunity within the TV and
film entertainment market.
Key Drivers
The bulk of the growth in the year came from localisation
services, of which subtitling remains a key tenet. The volume of
work on physical products, namely DVD and Blu-ray, continued its
expected gradual decline in the year while the main driver of
growth was undoubtedly the preparation of content for sale through
digital platforms.
Operational review
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.
Another year of strong subtitling revenue growth
We are delighted to report on another successful year of growth
for our subtitling services, with revenues almost doubling over the
period. Following ongoing investment in research and development
and building a pipeline for ZOOsubs, it has been reassuring to
witness its continued 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.
Enhancements to the platform delivered over the period have enabled
freelance translators who work on ZOO projects to operate more
efficiently and productively, for example, by reducing the
administrative overhead of processing purchase orders and raising
invoices. Since many of our translators undertake work for other
localisation service providers, these enhancements benefit ZOO by
making our ecosystem attractive to this community, helping us to
retain and grow our network of translators.
Successful launch of the industry's first cloud-based dubbing
service
In April 2017 we launched the industry's first cloud-based
dubbing service, powered by our new ZOOdubs platform, at the
National Association of Broadcasters (NAB) show in Las Vegas, where
it was awarded TV Technology's 'Best in Show' accolade. Two further
awards have subsequently followed: an IABM award for Design and
Innovation at the International Broadcast Convention in Amsterdam
and a Broadcast and Media Award at NAB 2018.
Our software provides a systematic and truly multi-lingual
solution for dubbing services which significantly reduces the need
for dedicated facilities, 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.
Helped by our success in subtitling, our dubbing service has
quickly developed strong levels of interest given that it addresses
a more complex and costly requirement for content owners. Within a
short space of time we have won projects from significant industry
players and are now delivering hundreds of hours of dubbing on a
monthly basis. Even within our first month of delivering the
service we were completing more dubbing each month than most mature
and established dubbing facilities, due to the scalability of our
distributed cloud computing approach.
Two main approaches to dubbing are widely used in the
entertainment industry. Voiceover, sometimes referred to as
"UN-style", is the simpler approach used in some countries and for
certain types of content, and is a style that does not usually
convey the richness of what is being said by the screen actors.
With this method, dubbed voices are not synchronised with the lip
movements of the screen actors. The second approach is known as
"lip-sync" dubbing in which voice actors aim to recreate a similar
performance to those on screen, delivering lines that match as
closely as possible the lip movements. This style is popular in
more countries than voiceover and is costlier to produce. While our
initial projects were for voiceover, we have subsequently developed
ZOOdubs to deliver both styles, meaning we are in a position to
complete any dubbing project in any language, subject to having
access to voice actors and directors, giving us the capability to
address a significant market opportunity.
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
nascence. 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 experience that we have gained from ZOOsubs, through
early adoption to its current rate of growth in both volumes and
margin contribution, gives us confidence that ZOOdubs will follow a
similar path.
Strong growth in localisation services
Our localisation services, which include subtitling and dubbing,
grew by 149% to $21.4 million (2017: $8.6 million). This is due to
ongoing strong growth of subtitling together with the introduction
of dubbing, where the contribution was mainly in the second half.
In the first half an average of 28 hours of dubbing was processed
through ZOOdubs per month. This increased to an average of 79 hours
per month in the second half, and in the two months following the
period under review has increased further to an average of 154
hours per month.
There has been additional recruitment of talent and the Group
now has a network of over 5,000 freelance workers, including
translators and voice actors, who are able to collaborate
efficiently with us on projects to satisfy an ever-growing pipeline
of demand.
Further innovation
In the traditional entertainment localisation ecosystem,
subtitling and dubbing assignments have followed two detached work
streams from the point of inception, and in the case of dubbing,
across different in-territory studios, which tends to lead to a
duplication of work and inconsistencies in translation across the
two independently crafted approaches. A recent innovation of ZOO is
a scripting service powered by a new cloud-based platform,
ZOOscripts, 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.
A significant challenge when dubbing newly produced titles
arises due to the need to have localised versions available across
multiple languages on the day of release. This necessitates that
the dubbing process begins with a preliminary edit of the content,
which is subject to change before the programme is finalised. In
practice, the production company may deliver a number of such
preliminary versions for localisation before final release, each of
which may differ from its predecessor through the addition of new
dialogue. Therefore, rigorous version control is essential to
ensure that the process operates efficiently, with voice actors
being recalled to record new dialogue but only where necessary, and
to quality assure the final delivery. We have addressed this
requirement through the development of a sophisticated version
control capability that is integral to our production systems,
involving the analysis of video and audio to identify automatically
the changes that occur between successive versions of the content.
This is enabling us to turn around each iteration of such a project
quickly and accurately.
The security of client content is paramount to ZOO's operations,
and we have continued to enhance our cloud software with further
features to enable even greater levels of protection. This includes
a new capability to prepare video content through the use of facial
recognition in order to 'spoil' the material without detriment to
the localisation process.
With the significant number of digital distribution channels now
available, together with the availability of consumer services in
over 200 countries, it is becoming increasingly challenging for
content owners to estimate the costs of distribution and determine
the return on investment of a particular strategy. ZOO has
developed a scenario planner to assist clients with this dilemma,
enabling language choices to be evaluated and localisation costs
estimated quickly and accurately.
With all of these new innovations the Board believes that the
strength of its existing relationships and its increasing
reputation as a technological innovator in the industry will help
it to cross sell services into its client base as well as
attracting additional new clients. We also anticipate some uplift
in digital packaging, as an increasing number of customers turn to
us for a broadening array of services, and we expect a growing
preference amongst buyers to work with partners that are able to
deliver an end-to-end solution for localisation and digital
packaging.
In the year ahead, we plan to continue investment in the
development of our cloud-based platforms to further enhance the
production services we offer, and to integrate our platforms with a
number of third party technologies to streamline our end-to-end
service offering. This should deliver improved operational
efficiencies, with benefits that we will be able to pass on to our
clients, leading to greater differentiation and competitive
advantage for our services. More recently we have begun a research
collaboration with the Speech and Hearing group in the Computer
Science department of the University of Sheffield. This project
will focus on machine learning and the application of speech
technologies that we believe will lead to further disruptive
innovation within the ecosystem that we are developing.
Expansion of our Freelance network
We have been pleased with progress in our programme to select,
train and engage freelance translators, 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 in both
of our dubbing and subtitling offerings, helping us to be more
effective and efficient than our competitors. Our freelance network
has now increased to over 5,000, growing from around 4,400 at the
end of the year under review (2017: 2,000), including members from
across multiple territories and languages, and its continued
expansion will remain a focus for the year ahead.
Growth of the customer base
One of the Company's main assets is the quality and breadth of
its customer base. Following the launch of its first cloud services
in 2009, the Group has expanded its customer base to include major
Hollywood studios, the BBC, Apple and many more. It was granted
Netflix preferred vendor status in 2016 and has recently been named
a Netflix Preferred Fulfilment Partner. Historically ZOO has been
reliant on revenue from one large customer, which once accounted
for over 80% of revenue. Due to the expansion of our customer base
and overall increased workflow, client concentration has decreased
in recent years, with the top two customers representing 34% and
24% in the year under review. Importantly, both these customers
have indicated their intention to increase their activities with
ZOO.
The consistently high quality of services we provide is
indicated by the proportion of client revenues that we retain from
one year to the next: after stripping out sales to one client with
which the Group discontinued services in 2016 following its
acquisition by a competitor, the proportion of client business in
FY2017 that continued into the period under review was 98% (2017:
97%).
Affiliate Network
Our affiliates 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. During the year, the
Group has been successful in adding new affiliates in emerging
markets, bringing the growing network to a current total of 8
across 10 locations. The new additions are Studio Ares in Turkey,
Bossdom in Taiwan, WhatSub Pro in South Korea, Dragoman in Turkey,
Captivate Arabia in Jordan and Olive Digital in UAE.
More recently we have strengthened our relationship with Kantana
Group in Thailand and Vietnam, one of Thailand's oldest and largest
film studios, to support our expansion of dubbing services in the
region. Staff at Kantana have been trained in our cloud-powered
software and will shortly be using ZOOdubs to work on in-territory
dubbing projects. Meanwhile, Kantana is helping ZOO to build
capacity, increase the local dubbing talent pool and identify
suitable in-territory traditional and alternative recording
environments in Asia.
We are seeing an increasing number of traditional dubbing
studios approaching us, which bodes well for future growth. We look
forward to building out this network further and working closely
with our chosen partners.
Investment in people and operations
We continue to invest in the expansion of our teams to support
further growth. Through the year we enlarged the R&D team to
accelerate development and assist in the roll-out of our dubbing
service. In March 2018 we appointed a new Creative Director and
Producer to oversee dubbing projects in Latin America: Raul Aldana
has joined the team to continue to grow ZOO's in-territory
localisation network and bring the very best talent to the cloud
dubbing platform. Raul brings a wealth of experience to the role,
having worked as Disney's creative head for Latin American Spanish
for the last 20 years.
More recently we have appointed a new Head of Operations and
Business Development, Asia to lead localization and distribution
services in the region. Norie Negishi has joined ZOO to help grow
capacity in Asia as we expand our cloud dubbing services in the
region. Norie joins ZOO with a 20-year track record with the Walt
Disney Company in Asia Pacific including working as Executive
Director of Operations for Disney Character Voices
International.
In the year ahead, we will add select resource in our operations
to ensure we have the structure to support the increase in volumes
of activity.
Another important operational development in the year was that
our new Sheffield facility received security accreditation from the
Content Delivery and Security Association. This is in addition to
our US office's existing accreditation under the Motion Pictures
Association of America Content Security Program, both of which are
key endorsements required by some of our existing and target
clients.
Fundraise
On 18 April 2017, a Placing was announced to raise GBP2.6
million of additional funds whilst at the same time converting
GBP1.1 million of debt into equity, 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.
Outlook
This has been another extremely successful year for the Group,
delivering considerable revenue growth while expanding our
offering. It is clear that we are operating in a market which is
right for our approach, where our technological innovation can
facilitate greater scalability for all industry players.
ZOO is increasingly viewed as a significant player in the media
localisation market, and with the introduction of dubbing we have
achieved a key milestone on our journey towards becoming a
one-stop-shop for all media localisation services across all
languages. Through the development of our innovative technology, we
are facilitating the ongoing disruption and growth of the digital
entertainment market and we will continue to invest in innovation,
quality and security to ensure we remain at the forefront of our
industry.
Our sales pipeline continues to grow across our offerings, both
from existing and new customers, giving us confidence in achieving
on-going organic growth. With a strengthened balance sheet,
enlarged commercial team and augmented offering, we look to the
future with confidence.
Stuart Green
Chief Executive Officer
FINANCIAL REVIEW
The strong growth that was reported last year continued into the
period ended 31 March 2018. We are pleased to report that sales
have increased 73% to $28.6 million (2017: $16.5 million) with
EBITDA adjusted for share-based payments up to $2.4 million (2017:
$1.8 million). The reported turnover for the second half was $15.9
million compared to $12.7 million in the first, which underlines
the reduction in seasonality of the business. The reported
operating profit for the year was $0.6m (2017: $0.5m) and the
reported loss before tax was $5.0m (2017: profit $0.5m) following a
non-cash charge for the fair value movement on an embedded
derivative brought about due to the rising share price.
Due to the Group's origins as a software company, gross profit
has previously been calculated as revenue less only external costs
of sale, being the cost of translators and other freelance workers
who provide linguistic services to us. Some other variable costs,
including those associated with internal staff employed to deliver
client projects, have been previously reported as central
overheads. As the proportion of our revenues from delivery of
services is now growing rapidly, it is becoming increasingly
difficult to infer our operational gearing from gross profit
reported on that basis. For that reason we have decided to classify
all variable costs as cost of sales, leading to a lower reported
gross profit margin but which, we believe, is more representative
of the dynamics of the business going forward. It bears clarifying
that, as a result of this recategorisation of costs, we would
expect that central overheads should increase at a more modest rate
in line with the growth of the business and the costs of underlying
infrastructure required to support it.
The prior full year period has been restated in the consolidated
statement of comprehensive income and is set out below for
comparison purposes. This change is presentational only and
represents a change in accounting policy with no impact on current
or prior year loss/profit.
We have also sought to add further clarity to the financial
statements by adapting the segmental analysis of revenues. In
previous reports the segmental reporting was based on the operating
divisions, when UK sales were primarily related to software
licensing whereas US sales were from service provision. As the
company has grown over recent periods, an increasing proportion of
service sales are invoiced from a UK subsidiary. Consequently, this
segmental reporting has become less appropriate for providing an
understanding of the constitution of sales. Going forward we will
report revenue analysis using the following three segments in line
with the internal reporting and management of the business:
1. Localisation - this is the fastest growing segment of Company
revenues and is made up of subtitling, captioning and dubbing.
Localisation grew very strongly by 149% to $21.4 million (2017:
$8.6 million) due to subtitling sales almost doubling over the
corresponding prior period, combined with the commencement of sales
from dubbing services that were introduced at the end of the first
half.
2. Digital Packaging - previously referred to as 'Digital
Distribution', this segment consists of sales for all service
lines, excluding localisation, that are required for the delivery
of video-based entertainment content to distribution channels,
including to OTT operators and for delivery on optical disc
formats. These services include compression and encoding of video
and audio materials, preparation of metadata, assembly of digital
packages and authoring of DVD and Blu-ray formats. During the
period under review, sales in this segment fell to $5.2 million
(2017: $5.8 million), primarily due to the on-going slow global
decline in demand for DVD and Blu-ray.
3. Software Licensing - this segment consists of sales generated
directly from the provision of our proprietary software which,
during the period under review, consisted predominantly of
recurring revenue from legacy products and declined slightly to
$1.9 million (2017: $2.0 million).
It has been particularly pleasing to see the commercialisation
of new dubbing services, made possible by our innovative cloud
software platforms, start so strongly and delivering a meaningful
contribution to our localisation segment in the second half of the
year.
The much higher billing amounts for dubbing projects compared to
those for subtitling may lead to a significant shift in client
concentration in future periods, dependent on the timing of the
adoption of this new service line by existing and new clients. We
have, during the year under review, continued to diversify our
client base and significantly reduce revenue concentration, such
that the revenue contribution from our largest client reduced to
34% of sales in 2018 (2017: 44%), with the second largest
accounting for 24%.
The initial period of delivering services using the new ZOOdubs
platform has followed a similar pattern to the one we observed five
years ago with the deployment of ZOOsubs: our imperative to provide
clients with services of the highest quality has led to higher
costs from extensive verification and quality control while the
software is being refined. We fully expect these margins to improve
as the software is proven and new features continue to be added. In
contrast, our subtitling services and the associated cloud software
have, over a period of five years, been proven, enhanced and
continually refined and are now delivering strong contribution
margins. From the segmental analysis it can be seen that the
contribution margin for localisation has increased to 31% (2017:
27%), and has the potential to improve further as our dubbing
proposition matures.
The second largest segment is digital packaging where the
blended contribution margin during the period has reduced to 60%
(2017: 69%), primarily due to the decline in demand for DVD and
Blu-ray titles.
The different gross margins achieved in the three revenue
segments, combined with the changing sales mix including strong
growth in localisation has led to an overall blended gross profit
margin of 35% (2017: 45%).
Operational fixed costs have increased to $7.7 million (2017:
$5.6 million) as we continue to build up the business. Our sales
team has been expanded to provide us with the means to develop
business opportunities with a greater number of clients; the total
number of accounts invoiced in the period increased to 158 (2017:
145). The R&D team has been enlarged through the addition of
new staff, enabling us to accelerate the development and roll-out
of our cloud software platforms, ensuring that we maintain our
competitive advantage in the market. Staff additions and other
enhancements in our operations, including in relation to provision
of high levels of security, have led to an increase in IT
expenditure in the period. The improved performance of the business
has led to us paying a bonus to all staff, including executive
members of the Board, recognising the significant contributions on
which such performance was made possible. We have also increased
our expenditure on marketing, primarily through exhibiting at a
greater number of international trade shows and other events that
provide a cost-effective way to reach existing and prospective
clients.
The post balance sheet event mentioned in the financial review
for the period to March 2017, consisting of an equity fundraising,
the conversion of debt into equity and extending the maturity of
the conversion of remaining loan notes, has led to a significant
strengthening of the balance sheet. Whilst we continue to have
access to a facility of up to $2.5 million in the US and a further
GBP250,000 overdraft in the UK, we have no borrowings outstanding
with the associated providers, and the only debt on the balance
sheet is the residual GBP2.54 million convertible loan note. This
instrument pays a coupon of 7.5%, has a conversion price of 48
pence and its term now ends in October 2020. For so long as the
share mid-price trades above this amount, as it has since
mid-December 2017, it would be reasonable to expect that holders
will choose to convert their holdings into equity prior to the end
of the term rather than request repayment.
A further consequence of a convertible loan note denominated in
pound sterling, whilst our financial statements are denominated in
US dollars, is that the consolidated statement of comprehensive
income includes an exchange adjustment on borrowings due to the
conversion of the value of the debt on 31 March. In the period
under review, the strengthening of pound sterling relative to US
dollar led to an exchange loss of $0.5 million, while in the
equivalent prior year period the statement showed a gain of $0.6
million, giving rise to a year on year variance of $1.1 million.
However, since the loan note can reasonably be expected to convert
into equity rather than be repaid, we do not expect an exchange
profit or loss to crystalise. In addition, the conversion of GBP1.1
million of the loan note in May 2017 has resulted in a charge to
the consolidated statement of comprehensive income of $0.1 million
(2017: nil).
Due to the fact that the remaining loan note is convertible,
compounded by its denomination in pound sterling while the Group's
reporting currency is US dollars, the instrument needs to be
treated as an embedded derivative for accounting purposes.
Movements in the share price of the Company can therefore have a
considerable, non cash effect on reported profit or loss before
taxation as these embedded derivatives are linked to the Company's
share price performance. ZOO's share price at the close of business
on 31 March 2017 was 10p, which contrasts sharply with its price of
97.5 at close of business on 29 March 2018 (being the last business
day before the year end date). Consequently, the statement of
comprehensive income includes a charge after EBITDA of $4.7 million
and the long term borrowings reported on the statement of financial
position are increased by $4.7 million. The long term borrowings
reported on the statement of financial position show a total of
$8.8 million which is made up from $3.6 million for the convertible
loan note, which is expected to convert into equity, $4.7 million
for the non-cash embedded derivative movement and $0.5 million for
finance lease liabilities. Only the latter item is expected to have
any cash impact.
These non-cash accounting entries have a material impact on
profit/loss before tax where the reported figure for the year to
March 2018 is a loss of $5.0 million (2017: $0.5 million profit).
After adjusting for share-based payments, the exchange gain/loss on
borrowings, the charge for the conversion of loan into equity and
the charge for the embedded derivative, profit before tax was $0.5
million (2017: loss of $0.1 million). None of these adjustments
have any cash implication.
The statement of financial position shows trade and other
receivables have increased significantly over the prior year period
to $7.4 million (2017: $3.8 million) and up 4% on the half year end
position (September 2017: $7.1 million). This figure includes
debtors together with a contribution for work in progress , sales
accruals and other items. The much higher volume of projects that
we are processing has led not only to a significant increase in
these assets. Despite a much enlarged debtor book, this is being
converted into cash in the normal course of business and, as of the
date of this report, 93% of year end debtors have since been
paid.
This will be my last report as CFO of the Group. In February I
took the difficult decision that after 18 years with ZOO, the last
12 of which have been in the role of CFO, it is time for me to move
on. Having worked as a senior member of the management team, I feel
proud to have contributed significantly to the transformation of
the Company from a small business providing DVD authoring tools for
one large customer, to become one of the leading providers of
localisation services to most of the major Hollywood studios and
global digital entertainment distributors. ZOO is at a really
exciting point in its development. While it will feel strange not
to be involved as the business moves forward, it is the right time
for me to pursue the next stage of my career. As I pass the baton
to my successor I am pleased to do so for a company that has the
strongest balance sheet for many years, is on an exciting growth
trajectory and has a wide range of excellent opportunities for
strong continued growth in a rapidly expanding market. I wish the
business ongoing success and growth in the coming years and will
continue to take an active interest in my capacity as a
shareholder.
By order of the Board
Helen P Gilder
Director and Secretary
FINANCIAL INFORMATION
The financial information set out here for the year ended 31
March 2018 does not constitute full statutory financial statements
as defined in section 434 of the Companies Act 2006 but has been
extracted from the Group's financial statements for that period.
Statutory financial statements for the year ended 31 March 2018
were approved by the directors on 29 June 2018, but have not yet
been delivered to the Registrar of Companies. Those financial
statements were reported upon without qualification by the
independent auditor and did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2018
2017
2018 Restated
Note $000 $000
==================================================== ========= ==========
Revenue 28,551 16,488
Cost of sales (18,486) (9,077)
===================================================== ========= ==========
Gross Profit 10,065 7,411
Other operating income - 196
Other operating expenses (9,426) (7,105)
===================================================== ========= ==========
Operating profit 639 502
===================================================== ========= ==========
Analysed as:
EBITDA before share based payments 2,396 1,780
Share based payments (276) (11)
Depreciation (450) (259)
Amortisation (1,031) (1,008)
===================================================== ========= ==========
639 502
==================================================== ========= ==========
Exchange (loss)/gain on borrowings (456) 624
Conversion of loan into equity (115) -
Fair value movement on embedded derivative (4,666) -
Finance cost (411) (591)
===================================================== ========= ==========
Total finance (cost)/income (5,648) 33
===================================================== ========= ==========
(Loss)/profit before taxation (5,009) 535
Tax credit 253 256
===================================================== ========= ==========
(Loss)/profit and total comprehensive
income for the year attributable to equity
holders of the parent (4,756) 791
===================================================== ========= ==========
Profit/(loss) per share 3
========================= ============= ===========
basic (6.81) cents 2.42 cents
========================= ============= ===========
diluted (6.81) cents 2.42 cents
========================= ============= ===========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2018
2018 2017
Note $000 $000
======================================= ===== ========= =========
ASSETS
Non-current assets
Property, plant and equipment 889 1,073
Intangible assets 6,541 6,915
Deferred income tax assets 486 486
======================================= ===== ========= =========
7,916 8,474
======================================= ===== ========= =========
Current assets
Trade and other receivables 7,412 3,753
Cash and cash equivalents 2,409 607
======================================= ===== ========= =========
9,821 4,360
======================================= ===== ========= =========
Total assets 17,737 12,834
======================================= ===== ========= =========
LIABILITIES
Current liabilities
Trade and other payables (6,106) (4,045)
Borrowings 6 (226) (4,102)
======================================= ===== ========= =========
(6,332) (8,147)
======================================= ===== ========= =========
Non-current liabilities
Borrowings 6 (4,084) (2,126)
Separable embedded derivative 6 (4,666) -
======================================= ===== ========= =========
(8,750) (2,126)
======================================= ===== ========= =========
Total liabilities (15,082) (10,273)
======================================= ===== ========= =========
Net assets 2,655 2,561
======================================= ===== ========= =========
EQUITY
Equity attributable to equity holders
of the parent
Called up share capital 5 1,010 7,236
Share premium reserve 41,003 37,007
Foreign exchange translation reserve (992) (992)
Convertible loan note reserve 42 42
Share option reserve 688 328
Capital redemption reserve 6,753 -
Other reserves 12,320 12,320
Accumulated losses (58,116) (53,360)
======================================= ===== ========= =========
2,708 2,581
======================================= ===== ========= =========
Interest in own shares (53) (20)
======================================= ===== ========= =========
Attributable to equity holders 2,655 2,561
======================================= ===== ========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2018
Foreign Convertible
Share exchange loan Share Capital Interest
Ordinary premium translation note option redemption Other Accumulated in 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 - - - - 11 - - - - 11
Issue Costs - (7) - - - - - - - (7)
Profit for
the year - - - - - - - 791 - 791
=============== ========= ======== ============ ============ ======== =========== ========= ============ ========= ========
Total
comprehensive
income for
the year - - - - - - - 791 - 791
=============== ========= ======== ============ ============ ======== =========== ========= ============ ========= ========
Balance at
31 March
2017 7,236 37,007 (992) 42 328 - 12,320 (53,360) (20) 2,561
Deferred
Shares (6,753) 3,881 - - - 6,753 - - - 3,881
Loan note
conversion - 115 - - - - - - - 115
Share based
payments - - - - 360 - - - - 360
Purchase
of own shares - - - - - - - - (33) (33)
Issue of
ordinary
shares 527 - - - - - - - - 527
=============== ========= ======== ============ ============ ======== =========== ========= ============ ========= ========
Loss for
the year - - - - - - - (4,756) - (4,756)
=============== ========= ======== ============ ============ ======== =========== ========= ============ ========= ========
Total
comprehensive
income for
the year - - - - - - - (4,756) - (4,756)
=============== ========= ======== ============ ============ ======== =========== ========= ============ ========= ========
Balance at
31 March
2018 1,010 41,003 (992) 42 688 6,753 12,320 (58,116) (53) 2,655
=============== ========= ======== ============ ============ ======== =========== ========= ============ ========= ========
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2018
2018 2017
Note $000 $000
============================================ ===== ======== ========
Cash flows from operating activities
Operating profit for the year 639 502
Depreciation 450 259
Amortisation and impairment 1,031 1,008
Share based payments 360 11
Disposal of property, plant and equipment - 1
Changes in working capital:
Increases in trade and other receivables (3,659) (1,222)
Increases in trade and other payables 2,061 949
============================================ ===== ======== ========
Cash flow from operations 882 1,508
Tax received 253 256
============================================ ===== ======== ========
Net cash inflow from operating activities 1,135 1,764
============================================ ===== ======== ========
Investing activities
Purchase of intangible assets (657) (541)
Purchase of property, plant and equipment 4 (266) (168)
============================================ ===== ======== ========
Net cash outflow from investing activities (923) (709)
============================================ ===== ======== ========
Cash flows from financing activities
Repayment of borrowings (927) (164)
Finance cost (437) (591)
Issue of share capital 2,987 -
Purchase of own shares (33) -
Share and convertible loan issue costs - (7)
Net cash inflow/(outflow) from financing 1,590 (762)
============================================ ===== ======== ========
Net increase in cash and cash equivalents 1,802 293
============================================ ===== ======== ========
Cash and cash equivalents at the beginning
of the year 607 314
============================================ ===== ======== ========
Cash and cash equivalents at the end
of the year 4 2,409 607
============================================ ===== ======== ========
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
1. 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, publishing 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
AIM Market of the London Stock Exchange 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 03858881.
The consolidated financial statements are presented in US
dollars, the currency of the primary economic environment in which
the company operates.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been applied consistently to all the years presented, unless
otherwise stated.
2.1 Basis of preparation
These financial statements have been prepared in accordance with
IFRS as adopted by the European Union, and with those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that effect the application of policies and reported amounts in the
financial statements.
A separate Statement of Comprehensive Income for the parent
company has not been presented as permitted by section 408 (2) of
the Companies Act 2006.
The directors have prepared trading and cash flow forecasts for
the group for the period to 31 March 2020 which show a continuation
of the growth in profitability and cash generation. In line with
industry practice in this sector the directors have had informal
indications from major and smaller clients to substantiate a
significant proportion of the forecast sales. The directors have
considered the consequences if the sales volume is less than the
level forecast and they are confident that, in this eventuality,
alternative steps could be taken to ensure that the group has
access to sufficient funding to continue to operate. The group has
a facility with Crestmark Bank which provides invoice financing of
up to $2.5m against US clients invoices raised by ZOO Digital
Production LLC. This facility is in place until 7 July 2019 with an
option to extend. In the UK there is an overdraft facility with a
limit of GBP250,000 in place with HSBC.
The convertible unsecured loan notes totalling GBP2.5m are in
place until 31 October 2020.
The directors believe the assumptions used in preparing the
trading and cash flow forecasts to be realistic, and consequently
that the group will continue in operational existence for the
foreseeable future. The financial statements have therefore been
prepared on a going concern basis.
New and revised standards that are effective for annual periods
beginning on or after 1 April 2017
A number of new and revised standards are effective for annual
periods beginning on or after 1 April 2017. Information on these
new standards is presented below.
IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28
IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint
Arrangements', IFRS 12 'Disclosure of Interests in Other Entities',
IAS 27 (Revised) 'Separate Financial Statements' and IAS 28
(Revised) 'Investments in Associates and Joint Ventures' form a
comprehensive package dealing with group issues and off-balance
sheet activity.
In order to determine whether a reporting entity has control
over another entity in which it has invested, the following three
elements must always be present:
- power over the investee
- exposure, or rights, to variable returns from its involvement
with the investee
- the ability to use its power over the investee to affect the
amount of the investor's returns.
- a joint operation is a joint arrangement whereby the parties
that have joint control of the arrangement (ie joint operators)
have rights to the assets, and obligations for the liabilities,
relating to the arrangement.
- a joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement (ie joint ventures) have
rights to the net assets of the arrangement.
IFRS 12 establishes disclosure objectives according to which an
entity discloses:
- significant judgements and assumptions (and changes) made by
the reporting entity in determining whether it controls another
entity
- the interest that the non-controlling interests have in the
group's activities
- the effect of restrictions on the reporting entity's ability
to access and use assets or settle liabilities of consolidated
entities
- the nature of, and changes in, the risks associated with the
reporting entity's interests in consolidated structured entities,
joint arrangements, associates and unconsolidated structured
entities.
The changes made to IAS 27 (Revised) 'Separate Financial
Statements' and IAS 28 (Revised) 'Investments in Associates and
Joint Ventures' are consequential changes arising from the
publication of the new IFRSs. The main change is that IAS 27
(Revised) will now solely address separate financial statements,
the requirements for which are substantially unchanged from the
previous version of the Standard. The requirements on how to apply
equity accounting are unchanged from the previous version of the
Standard.
The application of IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28
applies prospectively for annual periods on or after 1 April 2017
and did not have a material impact on the financial statements.
Standards and interpretations in issue at 31 March 2018 but not
yet effective
The following standards and interpretations of relevance to the
group have been issued, but are not yet effective and have not been
adopted by the group:
IFRS 15 Revenue from Contracts with Customers (effective 1
January 2018)
IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 16 Leases (effective 1 January 2019)
IFRS 14 Regulatory Deferral Accounts (effective 1 January
2018)
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published by the IASB but are not yet
effective, and have not been adopted early by the group
Management anticipates that all of the relevant pronouncements
will be adopted in the group's accounting policies for the first
period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that
are expected to be relevant to the group's financial statements is
provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on
the group's financial statements.
The Directors are finalising the assessments of the impact of
the implementation of IFRS 15 and expect these to show that there
will be no material impact on the way revenues are recognised
across the group.
Other standards and interpretations in issue but not yet
effective are not considered to have any relevance to the group
other than IFRS 16 Leases and IFRS 15.
2.2 Consolidation
Subsidiaries are all entities (including structured entities)
over which the group has control. The group controls an entity when
the group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is obtained until the
date that control ceases.
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.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting regularly reviewed by the group's chief
operating decision maker to make decisions about resource
allocation to the segments and to assess their performance.
2.4 Foreign currency translation
2.4.1 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. The functional currency of the company's subsidiaries is
US dollars, therefore the majority of transactions between the
company and its subsidiaries and the company's revenue and
receivables are denominated in US dollars.
The US dollar/pound sterling exchange rate at 31 March 2018 was
0.710 (2017: 0.799).
3. (Loss)/profit per share
Earnings per share is calculated by dividing the (loss)/profit
attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the year.
Basic and Diluted
2018 2017
$000 $000
(Loss)/profit for the financial year (4,756) 791
======================================= =============== ========
2018 2017
Number Number
of shares of shares
Weighted average number of shares for basic &
diluted (loss)/profit per share
=================================================== =========== ===========
Basic 69,841,166 32,660,660
Effect of dilutive potential
ordinary shares:
Convertible loan note 5,452,241 6,396,876
Share options 5,711,639 3,632,845
Diluted 81,005,046 42,690,381
=================================================== =========== ===========
The 2017 basic and diluted earnings per share are the same due
to the average share price during the period being lower than the
conversion price or exercise prices of the convertible loan note
and share options. The 2018 basic and diluted earnings per share
are the same due to the reported loss.
4. Notes to the cash flow statement
4.1 Significant non-cash transactions
During the year the group acquired property, plant and equipment
and computer software with a cost of $266,000 (2017: $900,000) of
which $nil (2017: $732,000) was acquired by the means of finance
leases.
4.2 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances
with banks. Cash and cash equivalents included in the cash flow
statement comprise the following consolidated and parent company
statement of financial position amounts.
Group Company
2018 2017 2018 2017
$000 $000 $000 $000
-------------------------------- ------ ----- ----- -----
Cash on hand and balances with
banks 2,409 607 201 57
-------------------------------- ------ ----- ----- -----
The fair values of the cash and cash equivalents are considered
to be their book value.
5. Share capital and reserves
Called up share capital
2018 2017
$000 $000
=============================================== ====== ======
Allotted, called-up and fully paid
73,773,655 (2017: 32,660,660) ordinary shares
of 1p (2017: 15p) each 1,010 7,236
----------------------------------------------- ------ ------
Reconciliation of the number of ordinary shares
outstanding:
Opening balance 32,660,660 32,660,660
Shares issued 28,611,111 -
Conversion of unsecured convertible loan note
into equity 5,555,556 -
Conversion of director's loan into equity 6,666,667 -
Share options exercised 279,661 -
------------------------------------------------- ----------- -----------
Closing balance 73,773,655 32,660,660
------------------------------------------------- ----------- -----------
On 4 May 2017 a reorganisation of the share capital took place
in which the existing ordinary shares were subdivided to create two
classes of shares: ordinary shares with a nominal value of 1p and
deferred shares with a nominal value of 14p. The proportion of the
issued ordinary share capital held by each shareholder was
unchanged by this subdivision, and other than the changed nominal
value, the ordinary shares carry equivalent rights to those they
replaced. The deferred shares carry no right to vote, attend or
speak at any general meeting or any right to a dividend.
On 4 May 2017 the company raised gross funds of approximately
$3.33m (GBP2.58m) through a placing and subscription comprising the
issue of 28,611,111 new ordinary shares of $0.01 (1p) each in the
company at a subscription price of $0.11 (9p). On the same day a
further 12,222,223 ordinary shares were 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 the
convertible loan note.
During the year the group purchased 42,576 (2016: nil) of its
own shares through ZOO Employee Share Trust Limited. The total cost
of the purchase was $20,000 (2017: nil).
Reserves
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
---------------------- ------------------------------------------------------
Share premium reserve Represents the amount subscribed for share capital
in excess of the nominal value.
Foreign exchange Cumulative exchange differences resulting from
translation reserve translation of foreign operations into the reporting
currency.
Convertible loan Represents the equity element of the convertible
note reserve loan note.
Share option reserve Cumulative cost of share options issued to employees.
Capital redemption Represents 32,660,660 deferred shares of 14p
reserve each created during the share reorganisation
on 4 May 2017
Other reserves Created as part of the reverse takeover between
Kazoo3D plc and ZOO Media Corporation Ltd in
2001.
Accumulated losses Cumulative net losses recognised in profit or
loss.
6. Borrowings
Group Company
2018 2017 2018 2017
$000 $000 $000 $000
Non-current
------------------------------- ------ ------ ------ -----
7.5% Unsecured convertible
loan note stock 3,581 - 3,581 -
Connected person loan - 751 - 751
Other bank borrowings 1 654 - -
Finance lease liabilities 502 721 165 219
------------------------------- ------ ------ ------ -----
4,084 2,126 3,746 970
------------------------------- ------ ------ ------ -----
Separable embedded derivative 4,666 - 4,666 -
------------------------------- ------ ------ ------ -----
Current
---------------------------- ------ ------ ------- -------
7.5% Unsecured convertible
loan note stock - 3,821 - 3,821
Amounts owed to subsidiary
undertakings - - 9,701 9,701
Finance lease liabilities 226 281 54 49
---------------------------- ------ ------ ------- -------
226 4,102 9,755 13,571
---------------------------- ------ ------ ------- -------
Total borrowings 8,976 6,228 18,167 14,541
---------------------------- ------ ------ ------- -------
On 1 April 2015 the group had a total of GBP3,070,500 in
unsecured convertible loan notes in place which were due to mature
on 31 October 2017. During the year ended 31 March 2018 GBP500,000
of the convertible loan stock was converted into equity and the
remaining GBP2,570,500 had its maturity extended to 31 October
2020. The loan notes pay a coupon of 7.5% and the loan stock holder
is entitled, before the redemption date, to convert all or part of
the loan stock into fully paid ordinary shares on the basis of one
ordinary share for every GBP0.48 of principal amount of loan stock.
The US dollar value of the loan notes at 31 March 2018 was
$3,581,000 (2017: $3,821,000).
The restructured convertible loan stock has two separate
economic components within it; the holder is entitled to convert
the loan note into equity at any point and the company is entitled
to convert the loan note into equity if the 30 business day
trailing average share price is above the level of GBP2.50 per
share. In both instances the conversion is on the basis of one
ordinary share for every GBP0.48 of principal amount of loan stock.
In prior years it has been assessed that there is no material value
to the resulting embedded derivative but in the year ended 31 March
2018 there has been significant increase in the company's share
price leading to the appointment of an independent valuation firm
to measure the fair value the two separate economic components as
at the balance sheet date. For the year ended 31 March 2018 the
valuation of the embedded derivatives resulted in a non-cash charge
totalling $4,666,000 (2017: nil) which has an underlying value of
GBP3,581,000.
The group has an arrangement with Crestmark Bank to provide an
invoice financing facility of up to $2.5m against US client
invoices raised by ZOO Digital Production LLC. This facility will
be in place until 7 July 2019 with an option to extend. The
structure of this loan arrangement has been renegotiated since the
year end to terms which are more favourable with the expectation of
a reduced need for lending in the future. The principal outstanding
at 31 March 2018 was nil (2017: $640,000). This funding is secured
against the US trade receivables of ZOO Digital Production LLC.
Previously the group had an agreement in place with Santander
Bank to provide an invoice financing facility of up to GBP500,000
against certain clients' invoices raised by ZOO Digital Limited.
The principal outstanding at 31 March 2017 was $14,000. During the
year ended 31 March 2018 the group changed its UK banking partner
to HSBC who provide an overdraft facility of GBP250,000. The
principal outstanding at 31 March 2018 was nil. Both lines of
funding have been secured as a floating charge over the assets of
the UK companies.
On 13 December 2013 Sara Green, wife of Dr Stuart A Green, made
a loan to the company of GBP600,000 with an interest rate of 10%.
On 4 May 2017, the full amount of this loan was converted into
equity. The US dollar value of the loan at 31 March 2018 was nil
(2017: $751,000). This loan was secured as a floating charge over
the assets of the group.
Annual report and Accounts
Copies of the Report & Accounts for the year ended 31 March
2018 are available to view on the Group's website
www.zoodigital.com
The Report & Accounts for the year ended 31 March 2018,
together with the notice of annual general meeting, are expected to
be posted to shareholders during August 2018; an announcement to
notify shareholders of this will be made in due course. Further
copies will be available from the Company's Registered Office:
Floor 7, City Gate, 8 St Mary's Gate, Sheffield S1 4LW
Annual General Meeting
The Annual General Meeting of the Group will be held at ZOO's
offices on 27 September 2018 at 4pm.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR RBMRTMBMMBLP
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Zoo Digital (LSE:ZOO)
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From Apr 2024 to May 2024
Zoo Digital (LSE:ZOO)
Historical Stock Chart
From May 2023 to May 2024