Last checked at 28 Jun 2010 07:01
ZOO DIGITAL GROUP PLC
('ZOO' or 'the group')
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2010
HIGHLIGHTS
Operational highlights
·; Continuing strong organic growth with existing major Hollywood studio where now engaged with four separate business units
·; Secured first engagement with a second major Hollywood studio and a further mid sized studio
·; Completed assignments for a number of other media companies
·; Expanded product offering in the areas of web-based collaboration and Blu-ray production and secured first customers
·; Further value driven from existing toolset
·; Post period end announcement of proposed strategic investment of $1.2m and partnership with Multi Packaging Solutions, Inc., a value-added print-based packaging solutions company enabling expansion of ZOO's business into new markets
Financial highlights
·; Revenue up 33% to $15.1m (2009: $11.3m)
·; Adjusted EBITDA of $1.6m (2009: Loss $0.1m)*
·; Adjusted operating profit of $0.8m (2009: Loss $0.7m)*
·; Cash generated from operating activities $2.1m (2009: $1.4m)
·; Year end cash balance $1.2m (2009: $1.4m)
·; Payment of final deferred consideration for Scope Seven acquisition and repayment of SYIF loan
·; No debt other than Convertible Unsecured Loan Stock for £3.54m ($5.1m) at 6% redeemable Q4 2011 held by major shareholders
·; Change in reporting currency to US$ reduces reporting inconsistencies for future years
*Adjusted EBITDA and operating profit are stated before exchange gain on intercompany transactions and exceptional impairment
Stuart Green, CEO of ZOO Digital, commented, "I am delighted with the progress that the Company has made since our last full year results, with an improvement in all of our key performance indicators. We have continued to add innovative new products, increase our reach within existing customers and add significant new clients,
"This performance has continued into the new financial period. Since the year end we have secured our first engagement with another major studio and our agreement with MPS will provide us with access to a variety of different industries and potential clients. The Board of ZOO continues to view the future with great confidence."
Change of Nominated Adviser Name
The Company has been advised that, with effect from 30 April 2010, its Nominated Adviser and Broker has changed its name to finnCap Ltd.
For further enquiries please contact:
| ZOO Digital Group plc | Tel: 0114 241 3700 |
| Stuart Green - Chief Executive Officer |
|
| Helen Gilder - Group Finance Director
|
|
| FinnCap | Tel: 020 7600 1658 |
| Marc Young/Henrik Persson
|
|
| Threedneedle Communications | Tel: 020 7653 9850 |
| Josh Royston/Graham Herring |
|
About Zoo
ZOO Digital Group plc (AIM:ZOO) is a provider of creative media repurposing software and related services. ZOO's Media Collaboration Platform consists of web-based systems and an integrated suite of desktop applications that work with printed materials and audio/visual content, adapting these media to different languages, sizes, and technical formats. ZOO makes this process extremely quick and cost effective and is clearly differentiated in the market.
ZOO's services are built on its proprietary patented software and enable customers to reduce considerably the costs and time to market of regionalized filmed entertainment titles and marketing campaigns across multiple territories and across a wide range of applications and formats, including printed materials, DVD, Blu-ray Disc, video on demand, electronic sell-through and broadcast. Working closely with language translation partners, ZOO's media adaptation software transforms computer-based workflows through radical process re-engineering and provides clear differentiation for the company's production, consulting and custom development services.
ZOO is focused on the worldwide creative media production markets and in particular video production for entertainment applications, with customers including major film studios and other producers and publishers of video-based consumer products.
CHAIRMAN'S STATEMENT
The board is pleased to report a strong performance ahead of market expectations for ZOO during the last financial year. Our revenues increased by 33% to $15.1m (2009: $11.3m), we achieved an operating profit (before exchange gain on intercompany transactions and exceptional impairment) of $821,000 (2009: loss of $745,000), and our cash generation improved to $2.1m (2009: $1.4m). Since nearly all of our revenue and over 70% of our costs are now incurred in US dollars, the board decided that ZOO's functional and presentational currency should be changed from pound sterling to US dollars. This change in reporting currency has introduced some inevitable complications in the comparisons between this year's results and last year's, but we believe that it is in the best long term interests of shareholders to report in this way. Notwithstanding the reporting currency, we regularly review our currency hedging position to mitigate the risk of exchange rate movements, although it is not economic to completely eliminate such risk.
The Hollywood studios and other large media companies are looking for better ways to create, manage and distribute their content, while developments such as the adoption of High Definition TV and video, 3D, and web-based distribution of video, present them with particular challenges. ZOO's innovative range of software and services, combined with our expert knowledge of the sector, have helped our customers automate and improve their workflow, and positioned us at the heart of their businesses. A range of licensing, software-as-a-service (SaaS), and pay-per use business models helps us develop long-lasting relationships with, and recurring revenues from, our customers.
During the year we continued to deepen our relationship with our largest Hollywood customer, extending the number, type and geographic scope of the products and services which we provide to them. We are particularly pleased to be able to announce since the end of the year that another major Hollywood studio has now begun adoption of our technology and services. In a further significant step towards reducing our dependency on a small number of large customers, we announced in June 2010 a partnership with Multi Packaging Solutions Inc (MPS), which offers us an exciting opportunity to apply our existing technology to the management of printing and packaging media for the pharmaceutical and other sectors outside entertainment.
ZOO is now positioned with a highly relevant set of products and services which help businesses deal with and profit from the impact of the digital revolution on the creation, management and distribution of all media. Our team has again shown itself capable of rapid development and delivery of highly innovative products and services, we count some of Hollywood's major studios as our best customers, and are beginning an alliance with MPS to apply our technology outside of the entertainment sector. Therefore I hope that all our shareholders will share my confidence in the future prospects of the group.
Board Changes
Gordon Doran was appointed to the main board during the year in recognition of the importance of our Los Angeles based operation to the success of ZOO. Gordon has held senior positions in sales and marketing for a number of software companies in the USA and the UK. He was formerly Chief Operating Officer for Mediostream Inc. and joined ZOO in 2005 to establish our North American division. In his role as President he is responsible for all North American operations and has been central to the development of our relationships with a number of large US entertainment companies.
On 28 April 2010 Christopher Honeyborne decided, in line with best practice, that he should stand down from the board after ten years service as a non-executive director, of which the last four were as Chairman. ZOO has benefited greatly from Christopher's stewardship and wise counsel, and on behalf of the board I extend my sincere thanks to him for his contribution to the transformation of the group. I was delighted to be appointed as successor to Christopher, and look forward to working with the board to help build substantial and sustainable value for our shareholders.
Roger D Jeynes
Chairman
CHIEF EXECUTIVE'S STATEMENT
Operational Review
We are delighted with the excellent progress we have made over the past year in delivering solid results that have exceeded market expectations.
Organisation
Our corporate headquarters and software product development centre is in Sheffield while our commercial operation and implementation and production services facility is based in Los Angeles. This arrangement gives us cost effective R&D with client services close to our customer base.
During the year we have grown our talented team of software technologists to respond to the numerous new product opportunities that we continue to uncover. Our Sheffield team of around 35 staff is made up mostly of software engineers, quality assurance engineers, product managers and others in supporting roles.
Our facility in Los Angeles accommodates a further 71 staff who are located close to our major customers and provide a range of value-added client services.
Sales and Marketing
Due to the niche nature of our video-based offerings we are able to be highly targeted in our sales efforts, identifying first the organisations that we believe will gain the biggest benefits from the use of our software, and then the key decision makers within those businesses. Our focus to date has been primarily in the filmed entertainment market where we aim to license software and provide related value-added services directly to brand owners.
In contrast, our proposition for automated repurposing of digital imagery has a much broader appeal. Since our entertainment customers create global marketing campaigns for their movies and TV programs, our initial commercial efforts have been within this market. Over the course of the last year we have deployed these solutions for three major customer groups and now have several hundred users working on product packaging and marketing campaigns at locations around the world.
We believe there is significant potential for our proposition outside the entertainment industry and have begun our search for strategic partners with whom we can work closely to secure new business in other markets. We recently announced a relationship with Multi Packaging Solutions Inc., a US print-based packaging solutions company with customers in healthcare, media, cosmetics and value added consumer markets. We are excited to be working closely with MPS over the coming months to secure new sales in the pharmaceuticals market, providing ZOO with significant growth potential.
Products
During the course of the year we have continued to broaden our product proposition by introducing the first component of our internet accessible Media Collaboration Platform - the Translation Management System (TMS). This is a workflow automation solution that enables multiple operators around the world to collaborate efficiently in the design and delivery of internationalised creative content. Further components of the Media Collaboration Platform are currently under development.
The TMS integrates with our range of desktop productivity applications which we have enhanced further, and also with a number of new tools that we released during the year. These combinations of software are enabling significant savings of time and cost - one of our customers has been able to reduce the time taken to produce complex marketing campaigns by half through the use of the TMS in conjunction with our Media Adaptation Tool.
Our revenues are based on throughput - products are priced according to usage, either as a Software-as-a-Service subscription or on a pay-per-use basis. This gives us solid recurring revenues whilst also aligning our interests with those of our customers - we are motivated to make our products more powerful and easier to use which encourages customers to use them more widely, so increasing our revenues.
We have secured further UK government grant funding to support our R&D efforts, this time in the form of a collaborative project supported by the Technology Strategy Board entitled "Commercialising Motion Picture Archives". We will be working on new technologies in association with UK rights holders and production services companies that we expect will lead to new video-related products in the future.
We launched a new toolset for the preparation of products on Blu-ray Disc and announced that a first major film studio has adopted this for creating international product releases. We believe that Blu-ray Disc represents a significant area of new revenue for ZOO and this new toolset gives us a unique position in a growth market that we intend to exploit.
The first of our workflow automation tools reached a milestone this year - the Menu Regionalisation Tool is used to create regionalised content for home entertainment products and in May we announced that it had been used to create more than 100,000 menus. Like all our products, this tool provides an automated solution that enables significant savings of time and cost. We have a number of further such automation products in the pipeline and continue to be proactive in protecting our intellectual property through patents wherever possible; we have more than 20 patents granted.
Our product suite continues to deliver clear competitive advantages and significant barriers to entry, enabling a differentiated proposition that addresses our customers' needs to reduce time and cost.
Markets
While our focus to date has been primarily on the filmed entertainment market we are now poised to take our existing products into new areas. The markets that are attractive to us are those that feature global companies producing creative content for many formats and languages. These are often large US companies marketing products and services on a worldwide basis, and spending significant sums in repurposing creative content within the products themselves, or on packaging and marketing campaigns.
The recent global economic changes have led to companies seeking cost saving opportunities more than ever before. Within the filmed entertainment market profit margins are under pressure and we have seen organisation-wide drives to cut costs. Our proposition is therefore ideally placed to address these new customer requirements to make their operations more efficient.
We are in the process of identifying partners to help us explore new markets for our existing products. A first such initiative is with HudsonYards, the premedia division of The CAPS Group, a provider of integrated creative, marketing and production services for advertising agencies, design firms, publishing companies, and corporations worldwide.
The focus of our direct sales and marketing efforts has been the filmed entertainment market. Through a new strategic partnership with Multi Packaging Solutions Inc. we plan to make inroads into the pharmaceutical industry.
Entertainment
Our growth has been achieved through a small number of large customers in the entertainment market. While this may seem like a vulnerable position, we believe that it provides a strong platform for further growth since we are usually able to expand our business to several divisions of the same organisation. The major Hollywood studios are quite diverse businesses structured as multiple divisions, yet the need to develop, process and deploy creative media is common to most of these divisions. For our largest studio clients we are now working with four separate divisions, each largely autonomous and seeking ways to save time and cost.
The proliferation of new consumer formats and platforms for delivery of home video over the past few years has led to a challenging economic situation for rights holders since content must now be prepared for multiple delivery formats in order to maximise sales. This leads to a significant increase in costs and time to prepare new products for market, and is further compounded by the complexities of delivering regionalised content into many territories. A growing proportion of content budgets will be spent on publishing across multiple devices and platforms and, based on the experience of the mobile phone industry, publishing costs could easily rise to 50% of total content budgets (source: Analysys Mason). Our proposition perfectly addresses this changing commercial landscape and provides brand owners with a way to reduce the costs of content repurposing across multiple platforms, formats and languages.
We were pleased to announce a software licensing agreement with CBS Home Entertainment, responsible for creating products across all of the CBS Corporation lines of content including current hits, such as NCIS, Dexter and 90210, and classic series from the vast CBS library. In an initiative to internalise production on selected titles, CBS Home Entertainment will use our products to design and produce certain titles in-house at its own facility, rather than outsource all of this work to traditional service providers. Our workflow automation systems enable video titles to be created quickly and easily without requiring specialist knowledge, and therefore can be used effectively by non-specialist operators within the studio.
In June 2010 we announced that a second major Hollywood film studio has adopted a solution using our Media Collaboration Platform. This allows the studio's content from a variety of media to be repurposed and reused across multiple formats, from printed materials to on-line content and optical discs. We're particularly excited about working with another of the major brands in entertainment and providing a very broad solution that spans most of its formats. In the past, clients have licensed specific software products, but this client intends to use our Media Collaboration Platform in the most comprehensive way across its entire home entertainment business. This is a further validation of ZOO's products and business model.
Everyone is trying to standardise methods of managing content across multiple media and languages. We're at the forefront in this area and are now working with some of the biggest names in entertainment to establish these standards which we believe will be very widely adopted.
Within the entertainment market we are tapping into areas of budgeted spend in activities currently outsourced to traditional service vendors. We estimate that the total addressable market for our current portfolio of products is several hundreds of millions of dollars per year.
Pharmaceutical
In June 2010 we announced an exciting new development for ZOO in the form of a strategic partnership with Multi Packaging Solutions (MPS), a provider of value-added print-based packaging solutions. We already share with MPS a number of film studio customers and we hope that our partnership will help us to grow our business further in this market, but the greatest value we anticipate from this new relationship is the entry it provides to customers in new markets. Together with MPS we have identified the pharmaceutical market as being particularly receptive to our proposition for printed media adaptation, having similar characteristics to those we have seen in our entertainment market customers.
The number of products introduced into international markets by healthcare companies is substantially greater than entertainment products, and therefore the partnership with MPS provides an exciting opportunity for us to scale the ZOO business by taking our existing products into clients of MPS. We look forward to updating the market with our progress in due course.
Strategy
We have identified that there are many areas where creative media is developed by large corporations for international delivery involving work being outsourced to service vendors. In many cases this work, while often highly complex, can be performed in a largely systematic fashion. Our workflow automation software displaces manual labour, thereby delivering the potential for significant savings of time and cost when this software is licensed directly to the brand owners.
Our licensing model is based on software utilisation and is levied as a combination of Software-as-a-Service subscription fees and usage fees, giving recurring and highly scalable revenues.
We develop and nurture open, transparent relationships with our clients and deliver to them first class customer service. This builds trust and fosters close collaborative working relationships that help us to uncover new areas of potential.
Our competitors are usually traditional vendors providing labour-based services who tend to be inflexible and resistant to change. Consequently we have a strong competitive advantage against them and our growth to date has been largely due to winning business from these companies.
Outlook
I believe that ZOO is poised for an exciting future and I am confident that we will deliver further profitable growth from our current customers, the entertainment market and in new areas of activity. The significant growth we have delivered to date has been achieved from a small customer base but the scalability of the business means that we can add new customers without significantly increasing headcount or cost base.
We have made great strides in the development of our media platform in the past year and are now poised to scale the business through a wider rollout to new customers, with growth arising from licensing existing products in new markets and new products in existing markets, and delivering value-added services.
We will continue to focus on major film studios and other global players in the entertainment market and are very enthusiastic about the new market openings that our strategic partnership with MPS brings.
Stuart A Green
CEO
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2010
|
|
| 2010 | 2009 |
|
| Note | $000 | $000 |
| Revenue |
| 15,056 | 11,336 |
| Cost of sales |
| (3,769) | (2,085) |
| Gross Profit |
| 11,287 | 9,251 |
| Other operating income |
| 177 | 136 |
| Operating expenses |
| (11,503) | (8,423) |
| Operating (loss)/profit |
| (39) | 964 |
| Analysed as: |
|
|
|
| Operating (loss)/profit before exceptional exchange gain on intercompany transactions and exceptional impairment |
| 821 | (745) |
| Exceptional exchange gain on intercompany transactions |
| - | 2,293 |
| Exceptional impairment |
| (860) | (584) |
|
|
| (39) | 964 |
| Finance income |
| 1 | 15 |
| Exchange loss on borrowings |
| (290) | - |
| Finance cost |
| (540) | (599) |
| Total finance cost |
| (830) | (599) |
| (Loss)/Profit before taxation |
| (868) | 380 |
| Tax on (loss)/profit |
| (4) | (36) |
| (Loss)/Profit for the year attributable to equity holders of the parent |
| (872) | 344 |
Other comprehensive income:
| Exchange difference on the change of presentation currency and on the translation of foreign operations |
| - | (2,231) |
| Other comprehensive income for the year, net of tax |
| - | (2,231) |
| Total Comprehensive income |
| (872) | (1,887) |
| Comprehensive income attributable to equity holders of the parent |
| (872) | (1,887) |
| (Loss)/Profit per share | 3 |
|
|
| basic |
| (4.09) cents | 1.76 cents |
| diluted |
| (4.09) cents | 1.15cents |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2010
|
|
| 2010 | 2009 | |
|
| Note | $000 | $000 | |
| ASSETS |
|
|
| |
| Non-Current Assets |
|
|
| |
| Property, plant and equipment |
| 558 | 763 | |
| Intangible assets |
| 6,903 | 6,862 | |
|
|
| 7,461 | 7,625 | |
| Current Assets |
|
|
| |
| Inventories |
| 365 | - | |
| Trade and other receivables |
| 2,667 | 2,076 | |
| Cash and cash equivalents | 4 | 1,221 | 1,414 | |
|
|
| 4,253 | 3,490 | |
| Total Assets |
| 11,714 | 11,115 | |
| LIABILITIES |
|
|
| |
| Current Liabilities |
|
|
| |
| Trade and other payables |
| (4,763) | (3,519) | |
| Borrowings | 6 | (169) | (523) | |
|
|
| (4,932) | (4,042) | |
| Non-current Liabilities |
|
|
| |
| Borrowings | 6 | (5,138) | (4,726) | |
| Total Liabilities |
| (10,070) | (8,768) | |
| Net Assets |
| 1,644 | 2,347 | |
| EQUITY |
|
|
| |
| Equity attributable to equity holders of the parent |
|
| ||
| Called up share capital | 5 | 4,573 | 4,573 | |
| Share premium reserve |
| 32,899 | 32,899 | |
| Other reserves |
| 12,293 | 12,293 | |
| Share option reserve |
| 267 | 110 | |
| Warrant reserve |
| 50 | 38 | |
| Convertible loan note reserve |
| 380 | 380 | |
| Foreign exchange translation reserve |
| (992) | (992) | |
| Accumulated losses |
| (47,822) | (46,950) | |
|
|
| 1,648 | 2,351 | |
| Interest in own shares |
| (4) | (4) | |
| Attributable to equity holders |
| 1,644 | 2,347 | |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2010
|
| Ordinary shares | Share premium reserve | Foreign exchange translation reserve | Convertible loan note reserve | Share option reserve | Share warrant reserve | Other reserves | Accumulated losses | Interest in own shares |
|
| $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 | $000 |
| Balance at 1 April 2008 | 5,336 | 45,735 | 111 | 528 | 107 |
| 17,075 | (65,643) | (4) |
| Issue of shares | 896 |
|
|
|
|
|
|
|
|
| Issue costs |
| (31) |
|
|
|
|
|
|
|
| Foreign exchange translation adjustment | (1,659) | (12,805) | (1,103) | (148) | (20) | (10) | (4,782) | 18,297 |
|
| Share based payments |
|
|
|
| 120 | 48 |
|
|
|
| Forfeited Share options |
|
|
|
| (97) |
|
| 52 |
|
| Profit for the year |
|
|
|
|
|
|
| 344 |
|
| Balance at 31 March 2009 | 4,573 | 32,899 | (992) | 380 | 110 | 38 | 12,293 | (46,950) | (4) |
| Share based payments |
|
|
|
| 157 | 12 |
|
|
|
| Loss for the year |
|
|
|
|
|
|
| (872) |
|
| Balance at 31 March 2010 | 4,573 | 32,899 | (992) | 380 | 267 | 50 | 12,293 | (47,822) | (4) |
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2010
|
|
| 2010 | 2009 |
|
| Note | $000 | $000 |
| Cash flows from operating activities |
|
|
|
| Operating (loss)/profit for the year |
| (39) | 964 |
| Finance income |
| 1 | 15 |
| Depreciation |
| 419 | 429 |
| Amortisation & Impairment |
| 1,214 | 821 |
| Share based payments |
| 169 | 119 |
| Disposal of intangible assets |
| 1 | - |
| Disposal of property, plant and equipment |
| 1 | 5 |
| Exchange gain on foreign operations |
| - | (2,384) |
| Changes in working capital: |
|
|
|
| (Increases)/decreases in Inventories |
| (365) | 291 |
| (Increases)/decreases in Trade and other receivables |
| (591) | (52) |
| Increases/ (decreases) in Trade and other payables |
| 1,244 | 1,099 |
| Cash flow from operations |
| 2,054 | 1,307 |
| Tax (paid)/ received |
| (4) | 132 |
| Net cash flow from operating activities |
| 2,050 | 1,439 |
| Investing Activities |
|
|
|
| Purchase of intangible assets |
| (1,256) | (1,044) |
| Purchase of property, plant and equipment |
| (215) | (148) |
| Net cash flow from investing activities |
| (1,471) | (1,192) |
| Cash flows from financing activities |
|
|
|
| Repayment of borrowings | 6 | (521) | (541) |
| Proceeds from borrowings | 6 | 120 | 116 |
| Finance cost |
| (371) | (436) |
| Share and convertible loan note issue costs | 5 | - | (31) |
| Issue of Share capital | 5 | - | 896 |
| Net cash flow from financing |
| (772) | 4 |
| Net increase/(decrease) in cash and cash equivalents |
| (193) | 251 |
| Cash and cash equivalents at the beginning of the year |
| 1,414 | 1,340 |
| Exchange (loss)/gain on cash and cash equivalents |
| - | (177) |
| Cash and cash equivalents at the end of the year | 4 | 1,221 | 1,414 |
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2010
1. General Information
ZOO Digital Group plc ('the company') and its subsidiaries (together 'the group') provide productivity tools and services for the video post-production, pre-media and interactive markets and continue with ongoing research and development in those areas. The group has operations in both the UK and US.
The company is a public limited company which is listed on the Alternative Investment Market and is incorporated and domiciled in the UK. The address of the registered office is The Tower, 2 Furnival Square, Sheffield.
The registered number of the company is 3858881.
The consolidated financial statements are presented in US dollars, the currency of the primary economic environment in which the company operates (note 2.4).
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. The areas involving a higher degree of judgements or complexity, or areas where assumptions or estimates are significant to the financial statements are disclosed in note 3.
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 2013. Recent months sales figures have shown increases in the group's sales of new and existing products to its existing customers, and an encouraging roll out of products to new customers. The forecasts assume, inter alia, that sales of products to existing and new customers will continue to increase. In line with industry practice in this sector the directors have had informal indications from major and other customers to substantiate a significant proportion of the forecast increased sales.
The directors have considered the consequences if the increase in sales volume is less than the level forecast. The directors are confident that in this eventuality alternative steps could be taken to ensure that the group can continue to operate without the need for additional funding.
The bank funding facilities are due for renewal in October 2010 and the directors have no reason to believe that this will not be renewed.
The directors believe these assumptions 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.
2.2 Foreign currency translation
2.2.1 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.
2.2.2 Change in Functional and Presentation currency
Over the recent past an increasing proportion of the group's trading transactions have been denominated in US dollars. The directors now consider US dollars to be more representative of the group's operations, and as a consequence with effect from 1 April 2009 the group has determined that its functional currency has changed from pound sterling to US dollars, and has elected to change its presentation currency from pound sterling to US dollars.
The effect of the change in the functional currency has been to commence using the US dollar as the functional currency from 1 April 2009. This change does not in itself have any effect on the comparative figures, but since the convertible loan notes are designated in pound sterling, the results now include an exchange loss on the principle value of the loan notes deriving from currency movement during the year; the comparative figures do not include an equivalent figure, since the functional currency at that time was pound sterling.
The effect of changing the presentation currency has been to restate the comparative figures by translating the figures in the Consolidated Statement of Comprehensive Income ("CSoCI") at the prevailing exchange rate in the month of transaction, and the figures in the Consolidated Statement of Financial Position at the year end rate. However, the underlying comparative figures have not been reworked as if the functional currency had been the US dollar. The treatment adopted is that required by IFRS. Consequently, the figures in the Consolidated Statement of Comprehensive Income relating to "exchange gain on intercompany transactions", which arose from translation from US dollars into pound sterling, have no comparable figure in the current year.
The pound sterling/US dollar exchange rate at 31 March 2010 was 0.6589 (2009: 0.6995).
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 | |
|
|
| 2010 | 2009 |
|
|
| $000 | $000 |
| (Loss)/profit for the financial year | (872) | 344 | |
|
|
|
|
|
| 2010 | 2009 |
|
|
|
|
|
| Number of shares | Number of shares |
| Weighted average number of shares for basic & diluted (loss)/profit per share |
|
| ||||
| Basic |
|
|
|
| 21,326,421 | 19,558,970 |
| Effect of dilutive potential ordinary shares: |
|
|
|
|
|
|
| Convertible loan note |
|
|
|
| 7,263,590 | 7,263,590 |
| Share options |
|
|
|
| 3,134,565 | 2,619,121 |
| Share warrants |
|
|
|
| 525,000 | 513,493 |
| Diluted |
|
|
|
| 32,249,576 | 29,955,174 |
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 $334,000 (2009:$382,000) of which $120,000 (2009: $274,000) 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 statement of financial position amounts.
|
| 2010 | 2009 |
|
| $000 | $000 |
| Cash on hand and balances with banks | 1,221 | 1,414 |
The fair value of the cash and cash equivalents are considered to be at their book value.
5. Share capital and reserves
Share capital
|
| 2010 | 2009 |
|
| $000 | $000 |
| Authorised |
|
|
| 26,666,667 ordinary shares of 15p each | 5,719 | 5,719 |
| Allotted, called-up and fully paid |
|
|
| 21,326,421 ordinary shares of 15p each | 4,573 | 4,573 |
| Reconciliation of the number of shares outstanding: |
|
|
| Opening balance | 21,326,421 | 17,913,089 |
| Shares issued | - | 3,413,332 |
| Closing balance | 21,326,421 | 21,326,421 |
On 6 October 2008 3,413,332 15p ordinary shares were issued at a price of 15p for total consideration of $732,000 (£512,000).
On 9 April 2009 the group purchased 473,500 of its own shares through ZOO Employee Share Trust Limited at an average price of $0.15 (10.3p) per share. The total cost of the purchase was $71,823 (£48,939).
Transactions after the reporting period are shown in note 25.
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. |
| Accumulative losses | Cumulative net losses recognised in the Consolidated Statement of Comprehensive Income for the group or the Statement of Comprehensive Income for the company. |
| Foreign exchange translation reserve | Cumulative exchange differences resulting from translation of foreign operations into the reporting currency. |
| Convertible loan note reserve | Represents the equity element of the Convertible loan note. |
| Share option reserve | Cumulative cost of share options issued to employees. |
| Share warrant reserve | Cumulative cost of share warrants issued to customers. |
| Other reserves | Created as part of the reverse takeover between Kazoo3D plc and ZOO Media Corporation Ltd in 2001. |
6. Borrowings
|
| 2010 | 2009 |
|
| $000 | $000 |
| Non-current |
|
|
| Amounts owed to subsidiary undertakings | - | - |
| 6% Unsecured convertible loan note stock | 5,054 | 4,595 |
| Finance lease liabilities | 84 | 131 |
|
| 5,138 | 4,726 |
| Current |
|
|
| Promissory note - Scenewise Inc. | - | 246 |
| South Yorkshire Investment fund loan | - | 107 |
| Finance lease liabilities | 169 | 170 |
|
| 169 | 523 |
| Total borrowings | 5,307 | 5,249 |
On 27 September 2006 the Group issued $5,062,000 6% Unsecured convertible loan note stock which is redeemable on 31 October 2011. The underlying value of the loan stock is £3,541,000. The loan stock holder is entitled, at any time after the first anniversary, to convert all or part of the loan stock into fully paid ordinary shares on the basis of 1 Ordinary share for every $0.6969 (£0.4875) of principal amount of loan stock. The company can force conversion if the mean average closing bid price of an ordinary share, as shown in the daily official list of the London Stock Exchange for at least 30 consecutive days is equal to or exceeds $12.87 (£9.00) on or before the third anniversary or $16.08 (£11.25) after the third anniversary.
The convertible loan stock has been accounted for in accordance with IAS 32 (Financial instruments: Presentation) and split between debt and equity based upon the market rate of similar loan stock not carrying conversion options, estimated to be 8%. The fair value of the convertible loan note is considered to be the carrying value.
The final instalment of Scenewise Inc. promissory note was repaid in December 2009. The loan carried a fixed interest rate of 10%. The promissory note arose on the acquisition of Scope Seven LLC. The South Yorkshire Investment fund loan was fully repaid on 15th May 2009. The loan carried a fixed interest rate of 12%. The fair values of the promissory note and the short term loan are considered to be their book values.
7. Events after the reporting period
On 15 April 2010 160,000 shares were issued following the exercise of employee share options.
On 15 April 2010 the group purchased 160,000 of its own shares through ZOO Employee Share Trust Limited at an average price of $0.51 (33p) per share. The total cost of the purchase was $81,660 (£52,800).
Since the year end the group has entered into four foreign exchange contracts to sell US dollars and purchase pound sterling on specific dates in the six months following the year end.
On 25 June 2010 the company entered into an agreement, which is subject in part to the approval of the company's shareholders, with Multi Packaging Solutions, Inc. Multi Packaging Solutions, Inc. will make a strategic investment of $1.2m (£0.8m) in the company. This comprises of the allotment and issue of 2,148,642 new ordinary shares of $0.23 (15p) each in the company, at a subscription price of $0.60 (40p) per share. It also comprises of, subject to the approval of the company's shareholders, a proposed issuance of warrants to subscribe for up to a maximum aggregate number of 2,148,642 new ordinary shares of 15 pence each in the company at a subscription price of $0.75 (50p) per share.
Annual report and Accounts
The Report & Accounts for the year ended 31 March 2010 are expected to be posted to shareholders on or around 5 July 2010. Further copies will be available from the Company's Registered Office:
The Tower
2 Furnival Square
Sheffield
S1 4QL
Copies will also be available on the group's website www.zoodigital.com.
Annual General Meeting
The Annual General Meeting of the group will be held at the offices of finnCap Limited, 4 Coleman Street, London, EC2R 5TA on 9 September 2010 at 11.30am.