REG - Zoo Digital Group - Interim Results
30/11/2023 07:15
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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 MONTHS ENDED 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 £12.5 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:
ZOO Digital Group plc +44 (0) 114 241 3700
Stuart Green - Chief Executive Officer
Phillip Blundell - Chief Finance Officer
Kam Bansil - Investor Relations
Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker) +44 (0) 20 7710 7600
Fred Walsh / Erik Anderson / Tom Marsh / Richard Short
Singer Capital Markets (Joint Broker) +44 (0) 20 7496 3000
Shaun Dobson / Asha Chotai
Instinctif Partners (Financial PR) +44 (0) 207 457 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 (http://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
(mailto: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 (http://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 (http://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 £12.5 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 to 6 months 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 (10,236) 3,364 8,232
equity holders of the parent
Profit per ordinary share
- basic (10.60) cents 3.80 cents 9.30 cents
- diluted (10.60) cents 3.46 cents 8.30 cents
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 30 September 2023
Unaudited as at 30 Sep 2023 Unaudited as at 30 Sep 2022 Audited as at 31 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
Ordinary shares Share premium reserve Foreign exchange translation reserve Convertible loan note reserve Share option reserve Capital redemption reserve Merger reserve Other reserves Accumu-lated losses Interest in own shares Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at
1April 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 1,284 70,683 (992) 4,690 6,753 1,326 12,320 (54,496) (49) 41,519
30 September 2023
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 to
30 Sep 2023 6 months to Year ended
$000 30 Sep 2022 31 Mar 2023
$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.
Localisation Media services Software Services Total
FY24 H1 FY23 H1 FY24 H1 FY23 H1 FY24 H1 FY23 H1 FY24 H1 FY23 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 profit per share 30 Sep 2023 30 Sep 2022 31 Mar 2023
No. of shares No. of shares No. of 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 6 months to 30 Sep 2023 Unaudited 6 months to 30 Sep 2022 Audited Year to 31 Mar 2023
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 (http://www.zoodigital.com) .
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