TIDMZOO
RNS Number : 1311V
Zoo Digital Group PLC
30 November 2023
30 November 2023
ZOO DIGITAL GROUP PLC
("ZOO" the "Group" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2023
ZOO Digital Group plc (LON: ZOO), a world-leading provider of
cloud-based localisation and digital media services to the global
entertainment industry, today announces its unaudited financial
results for the six months ended 30 September 2023 ("H1 FY24").
Summary
Key Financials
-- Revenues decreased by 58% to $21.4 million (H1 FY23: $51.4
million) primarily as a result of the Hollywood writers' and
actors' strikes
-- Gross profit decreased by 87% to $2.1 million (H1 FY23: $16.5 million)
-- Adjusted LBITDA(1) of $7.1 million (H1 FY23: EBITDA of $7.3 million)
-- Operating loss of $10.9 million (H1 FY23: $3.8 million operating profit)
-- Completed in April 2023 an equity fundraise of GBP12.5
million ($15.5 million) for the proposed acquisition of a trusted
partner in Japan
-- Cash balance of $16.8 million at period end (H1 FY23: $10.8 million)
Operational Highlights
-- Localisation revenues fell by 58%
-- Media services revenue fell by 61%
-- Freelancer network declined slightly to 11,745 (H1 FY23: 12,343)
-- Strategic international investments in Korea and Turkey, and
launch of Chennai facility post period, as ZOO continues to align
with major customers' growth plans
-- Continuing development and integration of ZOOstudio with customer operations
-- Leading standard of customer satisfaction maintained - retained sales KPI was 99.5%
-- Post period, named APAC Netflix Preferred Fulfilment Partner
of the year for outstanding results in this programme including an
on-time delivery rate of 99.5%
Outlook and Post Period Events
-- Resolution of writers' and actors' strikes in September and November respectively
-- Following a subdued first half, commenced second half with a
stronger order book from major customers
-- Expect to deliver progressively stronger sequential
performance in each of Q3 and Q4, with significant increase in
sales in FY25
-- Expect to achieve at least break-even at EBITDA level in Q4
and return to profitability in FY25 in line with current market
expectations
-- In regular dialogue with the vendor of the proposed target in Japan
(1) adjusted for share-based payments.
Stuart Green, CEO of ZOO Digital, commented:
"The year to date has been overshadowed by the first joint
strike of Hollywood actors and writers in more than 60 years. This
temporary disruption has had a significant impact across our sector
and the wider media and entertainment industry, resulting in
artificially low production volumes in the short-term. While this
has had a significant impact on our financial performance, we have
taken targeted measures to conserve cash while positioning the
business to recover rapidly once orders return to more usual
levels.
"As the streaming industry focuses increasingly on
profitability, we are already seeing evidence that major buyers are
relying on fewer vendors and prioritising those with end-to-end
capacity and scale. This puts ZOO in a strong position to process
higher volumes of work from customers over time, particularly as we
make strategic investments in customers' high-priority growth
regions.
"With the resolution of the strikes, we look to the future with
optimism and anticipate a phased return of orders in the second
half, accelerating into FY25. We remain confident in the industry's
long-term structural growth drivers and our role as a trusted
partner to many of the world's largest entertainment
companies."
For further enquiries, please contact:
+44 (0) 114 241
ZOO Digital Group plc 3700
Stuart Green - Chief Executive Officer
Phillip Blundell - Chief Finance Officer
Kam Bansil - Investor Relations
Stifel Nicolaus Europe Limited (Nominated Adviser +44 (0) 20 7710
and Joint Broker) 7600
Fred Walsh / Erik Anderson / Tom Marsh / Richard
Short
+44 (0) 20 7496
Singer Capital Markets (Joint Broker) 3000
Shaun Dobson / Asha Chotai
+44 (0) 207 457
Instinctif Partners (Financial PR) 2020
Matthew Smallwood / Joe Quinlan zoo@instinctif.com
Analyst and Investor Presentations
An interim results presentation will be made available on the
Company's website at www.zoodigital.com .
The Company will be hosting an in-person event for analysts at
9:30am GMT on Thursday 30 November at the offices of Instinctif
Partners in London. Analysts are invited to register to attend by
contacting ZOO@instinctif.com .
In addition, a live-streamed investor presentation will take
place at 5:00pm GMT on Thursday 30 November. Participants can
register at the following link: www.zoodigital.com/interims2024
About ZOO Digital Group plc:
ZOO Digital supports major Hollywood studios and streaming
services to globalise their content and reach audiences everywhere,
by providing leading, technology-enabled localisation and media
services.
Founded in 2001, ZOO Digital operates from hubs in Los Angeles,
London, Dubai, Turkey, South Korea, India, Denmark and Spain with a
development and production centre in Sheffield, UK.
The Group provides media services through its platforms that
include: ZOOsubs, ZOOdubs and ZOOstudio. Its full-service
proposition delivers the end-to-end services required to prepare
both original and catalogue content for digital distribution; these
services include dubbing, subtitling & captioning, metadata
creation & localisation, mastering, artwork localisation and
media processing. Alongside this offering, ZOO also provides its
customers with management platforms and strategic solutions to
support their own internal globalisation operations.
ZOO is a go-to service partner for media businesses looking to
globalise their content across different territories, languages and
distribution platforms. Using its innovative technology-enabled
approach, ZOO helps its customers to reduce time to market, lower
costs and deliver high quality products to their global audiences.
The business has frameworks in place with all major Hollywood
studios and streaming services. Its customers include Disney,
NBCUniversal, HBO and Paramount Global.
ZOO's competitive advantage arises from three interlinking
factors - the leading role it has played in the digital
transformation of its sector; the world class proprietary platforms
that it develops to enable this transformation; and the global
supply chain of thousands of freelancers, working collaboratively
in ZOO's platforms, which delivers services that scale easily to
meet demand. These factors combine to make ZOO uniquely placed to
capitalise on new market opportunities in a fast-paced and
constantly evolving industry.
www.zoodigital.com
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
Overview
The first half of FY24 saw an unprecedented period of
disruption, not only for ZOO, but for the film and TV entertainment
industry more widely. The Company has taken necessary steps to
mitigate the impact of this short-term disruption while ensuring we
are well positioned to recover strongly and win market share.
Market
In the early months of calendar 2023, all major US media
corporations undertook strategic reviews, prompted by the rapidly
shifting economic landscape for entertainment as consumers migrate
away from network television. The hiatus of new projects that this
caused was compounded by industrial action in Hollywood as writers
and then actors went on strike - the first joint industrial action
in more than 60 years - effectively bringing all film and TV
production projects to a halt for a period of six months.
Since FY22 the work that ZOO received from its customers
consisted predominantly of localisation and media services applied
to newly created content. Consequently, the disruption has had a
significant adverse impact on order volumes received during the
period, not only by ZOO, but also by all its major competitors.
This temporary industry-wide hiatus is clearly reflected in ZOO's
financial results for the FY24 H1 period.
Prior to the industrial action, in April 2023 the Company
successfully completed an oversubscribed placing of GBP12.5 million
($15.5 million) for the proposed acquisition of a trusted partner
in Japan - a strategic growth market for content and localisation
budgets. Given the subsequent industry-wide disruption that
followed, the Board decided to place the acquisition on hold, to
enable it to maintain a strong balance sheet. Meanwhile, we have
continued to have regular positive dialogue with the vendor.
The leadership of the Writers' Guild of America, which
represents 11,500 screenwriters, voted on 27 September 2023 to end
its strike following resolution of the labour dispute, thereby
paving the way for resumption of preparation of new scripts.
However, restarting productions was contingent on actors returning
to work which was finally resolved on 9 November 2023 when the
leadership of the Screen Actors Guild - American Federation of
Television and Radio Artists (SAG-AFTRA) agreed contract terms for
the next three-year period for its 160,000 members. This was the
longest strike in the union's history and its repercussions have
been far-reaching across the industry, not only in the US but in
the UK and many other countries where local actors are often
members of SAG-AFTRA as well as local unions (such as Equity in the
UK). Practically every discipline in the wider entertainment
ecosystem is affected when actors take industrial action including,
of course, those services supplied by ZOO.
Insofar as the Board is aware, major players have not sought to
address the content shortfall through the period of the strikes
with back catalogue material, but rather have elected to preserve
budgets for the creation of localised versions of newly produced
original programmes. Consequently, the projects on which ZOO worked
during the first half year have been related predominantly to
titles that were filmed prior to the actors' strike, together with
some content produced internationally.
With the recent ending of strikes, we can now look ahead to a
resumption of productions and restoration of previous typical
volumes of new titles; however, the pace of this recovery remains
unclear at present. Resuming a typical project will require
reassembling and scheduling a cast and crew of potentially hundreds
of people, and there will be competition for accessing the sound
stages that are necessary for studio recording. Talented crew
members will be in high demand and given the number of jobs lost
from the industry as individuals sought alternative sources of
employment, this will create a bottleneck. It will require a period
of planning before each project can resume and so the period of
recovery is likely to extend over several months. Therefore, while
ZOO can expect assignments in the near term relating to some new
programming, it seems likely that full resumption of former levels
of work will not take place until FY25.
Throughout calendar 2023 major entertainment industry players
have implemented significant changes in their operations, including
cost cutting, a return to licensing of content that has until
recently been used as a competitive differentiator, greater
exploitation of advertising such as through the launch of
ad-supported subscription tiers and Free Ad-supported Streaming TV
(FAST) channels, refinement of go-to-market strategies, bundling
with other services, and many other initiatives that, in
combination, should enable these businesses to reach streaming
profitability sooner. Recent quarterly earnings reports from major
media companies indicate good progress in this respect.
Overall, the Board believes that these changes will be
beneficial to ZOO. Several major buyers have elected to contract
their vendor pools, thereby requiring fewer studio personnel to
manage these relationships. In one case a client has reduced its
vendor pool for localisation and media services from around 15 to
five including ZOO. In all such situations where vendor programmes
have been revised ZOO is either confirmed as an on-going partner or
expects to be selected once the review process is complete.
As large buyers choose to concentrate work on a smaller number
of vendors, there is a growing preference for those that are able
to provide an end-to-end (E2E) service, namely, to offer all
necessary media services together with subtitling and dubbing
across all required languages. ZOO is one of few providers with
this capability and scale.
The pace at which ZOO's former levels of revenue will be
restored is dependent on both the recovery of the entertainment
industry generally and more specifically the media localisation
sector. However, the Company's success will depend on its ability
to continue to deliver services of the highest calibre. In this
regard, through the recent period of uncertainty and disruption,
ZOO has maintained consistently high performance metrics as
measured and reported by its customers. Indeed, in November ZOO was
named APAC Netflix Preferred Fulfilment Partner of the year having
achieved outstanding results in this programme including an on-time
delivery rate of 99.5%.
Operations
The significant impact of the temporary industry disruption in
the first half is clearly reflected in the Company's financial KPIs
for the period:
-- Revenue fell to $21.4 million (FY23 H1: $51.4 million)
-- Adjusted LBITDA(1) margin 33.0% (FY23 H1 EBITDA 14.2%)
-- OPEX as a % of revenue 60.7% (FY23 H1: 24.6%)
-- Operating Loss margin 51.0% (FY23 H1: profit 7.4%)
The impact on profitability is a result in part of the time
taken to implement cost savings, but also the strategic intent of
the Board to retain a level of resources that exceeds short term
demand so that recovery can be rapid once industry production
resumes.
-- Number of freelancers(2) 11,745 (FY23 H1: 12,343)
-- Retained Sales(3) 99.5% (FY23 H1: 99.0%)
The number of freelancers available to ZOO declined slightly in
the period due, in part, to some individuals choosing to leave the
industry and find alternative employment as a result of the wider
disruption.
(1) Adjusted for share-based payments.
(2) The number of active freelance workers in ZOO's systems who
are engaged directly.
(3) Proportion of client revenues retained from one year to the
next.
In addition to cash conservation measures, the Board has focused
on several steps to improve operational efficiency. The fit out of
a new facility located in the Southern India city of Chennai was
completed in the period, a process that began in FY23. Covering
11,000 square feet across two floors, the new production facility
is equipped with leading technology, opens opportunities for South
Indian-language content and distribution into South Indian markets,
and will serve as a location from which to operate certain services
to fulfil work for clients in the US and elsewhere.
The reduced level of orders has provided an opportunity to
enhance training materials and to cross-train staff across multiple
workflows and client processes. The Company's ZOO Academy programme
serves as a resource for the development of skillsets both by
internal staff and freelancers across multiple roles and
disciplines.
In addition to establishing a stronger presence in India, ZOO
has also continued to expand its international presence for dubbing
through investments in partners. This includes a further investment
in ZOO Turkey and establishing a presence in Iberia with facilities
in Madrid and Valencia which now operate as a primary hub for ZOO's
operations in Spain and Portugal. Further similar investments are
planned to expand the Company's capability in other strategic
locations.
While ZOO remains committed to extending this international
presence to an operation in Japan, which is and will continue to be
a strategic growth market for entertainment content, the Company
has not yet made a binding agreement to acquire the proposed target
for which capital was raised in the equity fundraise announced in
April. The view of the Board is that further proof of business
recovery and a strong balance sheet are necessary before it would
be prudent to enter a binding contract. Accordingly, we remain in
regular dialogue with the vendor.
A major factor in the dispute between unions and studios has
been in relation to the application of Artificial Intelligence
(AI). The key terms of the agreements reached with both writers and
actors include a range of safeguards around use of such
technologies to ensure that human talent is not exploited, and is
both fairly compensated and credited with all creative
contributions made to motion pictures and TV content. These
safeguards extend to the practice of preparing adaptations of
scripts for other languages and the creation of dubbed soundtracks.
The frameworks are designed to ensure that the benefits of new
technologies can be exploited but in ways that are fair and
sustainable.
As a long-standing and proven innovator in the sector, ZOO is
uniquely placed to capitalise on benefits afforded by AI in
multiple applications within the realms of subtitling and dubbing
and, moreover, has been proactively engaged in research and
development of technologies that the Board anticipates will yield
commercial and operating benefits in the future. ZOO's strategy is
to leverage such technology where appropriate to augment and assist
traditional processes rather than to displace or obviate the need
for skilled human talent, which includes specialist media
translators, actors, and directors. Consequently, the Board regards
the AI revolution that is unfolding as an opportunity for ZOO to
broaden its capabilities and cement its leadership position within
the sector.
While the recent period of disruption has brought about
significant change across the entertainment industry, the strategic
imperatives that set ZOO apart from its competitors remain as
relevant and important as ever. Through the period of recovery that
lies ahead the Company will continue its strategic focus on its
stated priorities:
-- innovation - by continuing to develop transformational technologies;
-- scalability - by developing and nurturing its freelancer
pool, including the development of training courses available
through ZOO Academy;
-- collaboration - in multiple areas, including AI-related
research, industry partnerships for dubbing and academic
partnerships with educational institutions;
-- customer focus - through the strengthening of its E2E
offering and provision of the ZOOstudio platform; and
-- talent - continuing with the global growth plan to expand the
talent pool with broader language-specific expertise and
reputation.
People
To conserve cash while navigating the industry hiatus, 118 team
members, representing 20% of the combined UK/US workforce, sadly
left the business in the period through redundancies and attrition.
Due to the uncertainty around the duration of the strikes and the
time taken to undertake employee consultation, this process was not
completed until early November. As a result, both direct and
indirect staff costs will be materially reduced throughout the
second half compared to the first.
As part of this exercise, a rebalancing of staffing across
locations has been undertaken to provide adequate resources for
growth regions and languages. A guiding principle has been to
maintain industry-leading performance metrics, with monthly
customer reports confirming that this has been achieved. Despite
the headcount reductions and savings implemented, the staff
retained across all service lines has the capacity to deliver, as
of the commencement of the second half, a greater volume of work
than current orders require. However, and particularly now that
strikes have ended, the Board has carefully considered the recovery
of the business and has chosen to retain capacity, with a
consequent cost, so that the Company can respond to customers'
needs and grow quickly when work resumes and capture market share,
thereby delivering superior profitability in the medium to
long-term.
The Board is enormously grateful to staff for their patience,
resilience, and dedication throughout what has been an
unprecedented challenging and difficult period for the
entertainment industry and the ZOO business. With industrial action
now at an end, we know that we can rely on staff embracing the
influx of work that we are confident lies ahead, and continuing to
deliver the high quality and innovation for which we are
renowned.
Outlook
Following a period of disruption that has lasted around nine
months since February 2023, the stage is now set for a recovery
that, over the medium term, should see ZOO returning to the levels
of business achieved in FY23 and continuing its growth from there.
Due to the time taken to plan and mobilise resources for each
production project, the Board expects the Company to deliver
progressively stronger sequential performance in each of Q3 and Q4,
with significant expansion of sales commencing from Q1 FY25.
Despite the low levels of project activities in the period, the
Company has continued its dialogue with customers throughout the
first half and all indications are that ZOO remains a valued
partner and will be a beneficiary as business resumes. In several
cases, relationships with senior customer contacts have been
strengthened and multiple new opportunities are expected to open
during the second half.
The Board remains focused to achieve at least break-even at
EBITDA level in Q4 and to return to profitability in FY25,
expanding ZOO's market share and prominence as a leading provider
of premium localisation and media services to the global
entertainment industry.
FINANCIAL REVIEW
Revenues of $21.4 million were 58% below the same period last
year (H1 FY23: $51.4 million). The shutdown in Hollywood from May
to November 2023 caused by the writers' and actors' strikes
resulted in an almost complete curtailment of orders to ZOO and its
competitors.
Gross profit decreased from $16.5 million to $2.1 million in the
period, reflecting the revenue reduction and the Board's decision
to maintain production capacity during the strikes. Gross margin
fell to 10% due to the significant deterioration in direct staff
utilisation. This is reinforced by direct staff costs rising from
21% of revenues to 55%.
Operating expenses increased 2.5% to $13.0 million (H1 FY23:
$12.7 million) as we continued to invest in infrastructure to
support our long-term revenue goals. This included our new
facilities in Korea and Chennai. This is reflected in OPEX as a
percentage of revenue, which increased from 25% of revenue to
60.7%. We continued to invest in our R&D programme where
expenditure increased 67% in the period.
Adjusted LBITDA of $7.1 million compares to a profit of $7.3
million last year as a direct result of the revenue decrease
without any significant reduction in OPEX, people or R&D. This
is also reflected in the operating loss of $10.9 million.
The loss before tax for the period was $10.1 million, which
compares to a profit of $3.5 million last year. The loss includes
the gain of $1.1 million attributed to the original 51% investment
in Korea when we completed the acquisition of the remaining 49% in
April 2023.
The cash balance as of 30 September 2023 was $16.8 million after
the completion of paying off short-term operating leases (H1 FY23:
$10.8 million before short-term operating leases of $0.3 million).
The increase was driven by the fundraise in April 2023 offsetting
the operating losses. This was further impacted by the outflow of
$4.0 million from investing activities and $1.2 million repayment
of leases in the period. The investing activities comprised R&D
of $1.5 million and CAPEX of $1.4 million. The CAPEX was used to
extend the production capacity in both India and Korea. The Group
purchased the remaining 49% of the investment in Korea for $0.2
million, and took a 30% stake in Estudios AM in Spain for $0.9
million, both investments following the stated strategy to build
international capacity to support our customers when the expected
growth in media localisation spend by our global media customers
returns.
The Group remains financially strong with net cash of $16.8
million at the end of September 2023 and no debt. This is further
enhanced by an unused $5.0 million debt facility with HSBC. Over
the coming months the Board is focused on aligning costs and
revenues to reach break-even in Q4 FY24.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
for the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months 6 months
to to Year ended
30 Sep
2023 30 Sep 2022 31 Mar 2023
$000 $000 $000
======================================= =========== ============= =============
Revenue 21,408 51,422 90,260
Cost of sales (19,329) (34,941) (56,327)
--------------------------------------- ----------- ------------- -------------
Gross Profit 2,079 16,481 33,933
Other operating income - 8
Operating expenses (12,988) (12,671) (25,860)
--------------------------------------- ----------- ------------- -------------
Operating (loss)/profit (10,909) 3,810 8,081
--------------------------------------- ----------- ------------- -------------
Analysed as
EBITDA before share-based payments (7,094) 7,286 15,466
Share based payments (286) (970) (1,650)
Depreciation (2,506) (1,768) (3,973)
Amortisation (1,023) (738) (1,762)
--------------------------------------- ----------- ------------- -------------
(10,909) 3,810 8,081
--------------------------------------- ----------- ------------- -------------
Share of profit of associates
and JVs 1,100 - 146
Finance income 165 - 8
Exchange loss on borrowings (100) - 247
Other finance cost (340) (299) (620)
--------------------------------------- ----------- ------------- -------------
Total finance cost (275) (299) (365)
--------------------------------------- ----------- ------------- -------------
(Loss)/Profit before taxation (10,084) 3,511 7,862
Tax on (Loss)/profit (152) (147) 370
--------------------------------------- ----------- ------------- -------------
(Loss)/profit and total comprehensive
income for the period attributable
to equity holders of the parent (10,236) 3,364 8,232
--------------------------------------- ----------- ------------- -------------
Profit per ordinary share
--------------------------------------- ----------- ------------- -------------
(10.60)
- basic cents 3.80 cents 9.30 cents
--------------------------------------- ----------- ------------- -------------
(10.60)
- diluted cents 3.46 cents 8.30 cents
--------------------------------------- ----------- ------------- -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 30 September 2023
Unaudited Unaudited Audited
as at 30 as at 30 as at 31
Sep 2023 Sep 2022 Mar 2023
$000 $000 $000
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
ASSETS
Non-current assets
Property, plant and equipment 14,092 12,952 14,736
Intangible assets 13,443 9,746 10,341
Investments 4,709 3,819 4,300
Deferred tax assets 1,708 1,842 1,664
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
33,952 28,359 31,041
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
Current assets
Trade and other receivables 7,742 15,092 16,532
Contract assets 4,831 3,600 4,836
Cash and cash equivalents 16,783 10,818 11,839
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
29,356 29,510 33,207
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
Total assets 63,308 57,869 64,248
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
LIABILITIES
Current liabilities
Trade and other payables (12,828) (17,338) (19,746)
Contract liabilities (571) (521) (693)
Borrowings (1,445) (741) (1,408)
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
(14,844) (18,600) (21,847)
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
Non-current liabilities
Borrowings and other payables (6,945) (8,579) (7,268)
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
Total liabilities (21,789) (27,179) (29,115)
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
Net assets 41,519 30,690 35,133
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
EQUITY
Equity attributable to equity
holders of the parent
Called up share capital 1,284 1,178 1,179
Share premium reserve 70,683 55,727 55,797
Other reserves 12,320 12,320 12,320
Share option reserve 4,690 3,625 4,391
Capital redemption reserve 6,753 6,753 6,753
Merger reserve 1,326 - -
Convertible loan note reserve - 5,471
Foreign exchange translation
reserve (992) (992) (992)
Accumulated losses (54,496) (53,339) (44,266)
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
41,568 30,743 35,182
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
Interest in own shares (49) (53) (49)
-------------------------------------------------------------------------- --------------------
Attributable to equity holders 41,519 30,690 35,133
-------------------------------------------------------------------------- -------------------- --------------------- ---------------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
for the six months ended 30 September
2023
Foreign Convertible
Share exchange loan Share Capital Interest
Ordinary premium translation note option redemption Merger Other Accumu-lated in own
shares reserve reserve reserve reserve reserve reserve reserves losses shares Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
--------------- --------- -------- ------------ ------------ -------- ------------ -------- --------- ------------- --------- ---------
Balance at
1 April 2022 1,174 55,665 (992) 5,471 2,619 6,753 - 12,320 (57,969) (49) 24,992
--------------- --------- -------- ------------ ------------ -------- ------------ -------- --------- ------------- --------- ---------
Issue of
share capital 4 - - - - - - - - - 4
Share options
exercised - 62 - - 36 - - - - - 98
Share-based
payments - - - - 970 - - - - - 970
Foreign
exchange
translation - - - - - - - - - (4) (4)
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Transactions
with owners 4 62 - 1,006 - - - - (4) 1,068
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Profit for
the period - - - - - - - - 3,364 - 3,364
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Total
comprehensive
income for
the period - - - - - - - - 3,364 - 3,364
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Balance at
30 September
2022 1,178 55,727 (992) 5,471 3,625 6,753 - 12,320 (54,605) (53) 29,424
Share options
exercised - 70 - - 86 - - - - - 156
Share-based
payments - - - - 680 - - - - - 680
Foreign
exchange
translation - - - - - - - - - 4 4
Transfer
of CLN - - - (5,471) - - - - 5,471 - -
Issue of
share capital 1 - - - - - - - - 1
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Transactions
with owners 1 70 - (5,471) 766 - - - 5,471 4 841
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Profit for
the period - - - - - - - - 4,868 - 4,868
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Total
comprehensive
income for
the period - - - - - - - - 4,868 - 4,868
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Balance at
31 March
2023 1,179 55,797 (992) 4,391 6,753 - 12,320 (44,266) (49) 35,133
Share based
payments - - - - 286 - - - - - 286
Foreign
exchange
translation - - - - - - - - 6 - 6
Share options
exercised - - - - 13 - - - - - 13
Issue of
share capital 105 15,604 - - - - 1,326 - - - 17,035
Transaction
costs
incurred - (718) - - - - - - - (718)
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Transactions
with owners 105 14,886 - - 299 - 1,326 - - 16,616
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Loss for
the period - - - - - - - - (10,236) - (10,236)
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Total
comprehensive
income for
the period - - - - - - - - (10,230) - (10,230)
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
Balance at
30 September
2023 1,284 70,683 (992) 4,690 6,753 1,326 12,320 (54,496) (49) 41,519
=============== ========= ======== ============ ============ ======== ============ ======== ========= ============= ========= =========
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
for the six months ended 30 September 2023
30 Sep
2023 30 Sep 2022 31 Mar 2023
Unaudited Unaudited Audited
6 months 6 months
to to Year ended
30 Sep
2023 30 Sep 2022 31 Mar 2023
$000 $000 $000
=========================================== =========== ============= =============
Cash flows from operating activities
Operating (loss)/profit for the
period (10,909) 3,810 8,081
Finance income 165 - 8
Depreciation 2,506 1,768 3,973
Amortisation 1,023 738 1,762
Share based payments 286 970 1,650
Disposal of property, plant and
equipment (12) -
Changes in working capital:
(Increases)/decreases in trade
and other receivables 9,346 10,976 5,251
Increases/(decreases) in trade
and other payables (7,048) (10,541) (5,219)
------------------------------------------- ----------- ------------- -------------
Cash flow from operations (4,643) 7,721 15,506
Tax (paid)/received (196) (147) 196
------------------------------------------- -----------
Net cash flow from operating activities (4,839) 7,574 15,702
------------------------------------------- ----------- ------------- -------------
Investing Activities
Purchase of intangible assets (20) (41) (60)
Capitalised development costs (1,512) (904) (2,163)
Purchase of subsidiaries (net of
cash acquired) (240) - -
Purchase of investments (905) 339 -
Purchase of property, plant and
equipment (1,362) (1,355) (4,706)
Payment of deferred consideration - - (1,300)
------------------------------------------- -----------
Net cash flow from investing activities (4,039) (1,961) (8,229)
------------------------------------------- ----------- ------------- -------------
Cash flows from financing activities
Repayment of borrowings (123) (219) (477)
Repayment of principal under lease
liabilities (710) (536) (748)
Finance cost (342) (42) (630)
Share options exercised 13 36 254
Issue of share capital (net of
costs) 14,984 4 5
-------------------------------------------
Net cash flow from financing 13,822 (757) (1,596)
------------------------------------------- ----------- ------------- -------------
Net Increase in cash and cash equivalents 4,944 4,856 5,877
------------------------------------------- ----------- ------------- -------------
Cash and cash equivalents at the
beginning of the period 11,839 5,962 5,962
------------------------------------------- ----------- ------------- -------------
Cash and cash equivalents at the
end of the period 16,783 10,818 11,839
------------------------------------------- ----------- ------------- -------------
NOTES
General information
ZOO Digital Group plc ('the Company') and its subsidiaries
(together 'the Group') provide end-to-end cloud-based localisation
and media services to the global entertainment industry and
continue with on-going research and development to enhance the
Group's core offerings. The Group has operations in the UK, the US,
India and South Korea.
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 Castle House, Angel
Street, 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 Group operates.
The interim accounts were approved by the board of directors on
29 November 2023 .
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 ending 31 March 2024
will be prepared in accordance with UK adopted international
accounting standards and the requirements of the Companies Act
2006.
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 2023, and have been
consistently applied, unless stated otherwise.
This condensed consolidated financial information is for the six
months ended 30 September 2023. It has been prepared with regard to
the requirements of IFRS. It does not constitute statutory accounts
as defined in S343 of the Companies Act 2006. It does not include
all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 31 March 2023
which contained an unqualified audit report and have been filed
with the Registrar of Companies. They did not contain statements
under s498 of the Companies Act 2006.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2023 annual financial statements, except for those that
relate to new standards and interpretations effective for the first
time for periods beginning on (or after) 1 April 2023 and will be
adopted in the 2024 financial statements. There are no standards
materially impacting the Group that will be required to be adopted
in the annual financial statements for the year ending 31 March
2024.
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.
Going concern
The Group's financial statements are prepared on a going concern
basis despite the losses incurred in the period. The Group
continues to have a strong order pipeline and has significant cash
reserves, and its results reflect predominantly the impact of the
Hollywood writers' strike which is anticipated to be short term
and, as at the date of approval of these financial statements, has
finished.
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.
Software
Localisation Media services Services Total
FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23
H1 H1 H1 H1 H1 H1 H1 H1
$000 $000 $000 $000 $000 $000 $000 $000
======================== ======= ======= ========= ======== ======== ======== ======== ========
Revenue 13,471 32,325 7,065 18,241 872 856 21,408 51,422
Segment contribution 2,282 8,533 2,676 9,870 689 766 5,647 19,169
Unallocated cost of
sales (3,568) (2,688)
================================= ======= ========= ======== ======== ======== ======== ========
Gross profit 2,079 16,481
================================= ======= ========= ======== ======== ======== ======== ========
Gross profit
% 17% 26% 38% 54% 79% 89% 10% 32%
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 Group'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 item 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.
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 30 Sep 31 Mar
profit per share 2023 30 Sep 2022 2023
===============================
No. of
No. of shares No. of shares shares
=============================== ============== =============== ==========
Basic 96,560,892 88,518,335 88,835,890
Diluted 107,012,875 97,103,550 99,287,873
Where the Group has recorded a loss, diluted earnings per share
is equal to basic earnings per share.
Alternative performance measure
Adjusted EBITDA is a key performance measure for the Group and
is derived as follows,
$000 Unaudited Unaudited Audited
6 months 6 months Year to
to 30 Sep to 30 Sep 31 Mar 2023
2023 2022
Profit/(Loss) before taxation (10,084) 3,511 7,862
Add back
Finance costs 275 299 365
Share based payments 286 970 1,650
Depreciation and Amortisation 3,529 2,506 5,735
Share of profit of associates
and JVs (1,100) - (146)
Adjusted EBITDA (7,094) 7,286 15,466
Acquisition of Whatsub Pro Inc.
On 11 April 2023 the Group acquired 49% of the ordinary share
capital of Whatsub Pro Inc ("Korea"), a company incorporated in
South Korea, which took the Group's ownership from 51% to 100% of
the ownership of Korea. Korea was previously accounted for as a
joint venture, and the step acquisition results in ownership of a
subsidiary which is to be accounted for as a business combination
under IFRS 3.
The 49% acquisition was satisfied by way of a payment of
$200,000 together with the issue of 550,000 1p ordinary shares in
the Company. The total consideration was therefore $1,533,000.
As a result of Korea being previously recognised as a joint
venture, the Group's financial statements reflects the disposal of
the joint venture at its carrying value of $552,000 for proceeds of
$1,596,000 (being a pro-rata fair value determined by reference to
the consideration paid for 49%). This resulted in a profit of
$1,044,000 which is included within the Group's share of profits
from joint ventures in its Income Statement.
The Group has not yet completed its assessment of fair values
acquired, although it does not anticipate any separable intangible
assets will be recognised on this business combination. Based on
the net assets reported by Korea on its acquisition date of
$621,000, the Group has provisionally recognised goodwill of
$2,592,000 on this transaction, which is included on the Statement
of Financial Position within intangible assets.
Further Copies
Copies of the Interim Report for the six months ended 30
September 2023 will be available, free of charge, for a period of
one month from the registered office of the Company at Castle
House, Angel Street, Sheffield, S3 4LN or from the Group's website:
www.zoodigital.com .
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END
IR NKCBNFBDDFDB
(END) Dow Jones Newswires
November 30, 2023 02:00 ET (07:00 GMT)
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