Last checked at 4 Sep 2008 07:00
4th September 2008
ZOO DIGITAL GROUP PLC
("ZOO" or "the Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST MARCH 2008
ZOO Digital Group plc, the digital media production technology company, today announces its financial results for the year ended 31 March 2008.
Operational highlights
15 year contract signed with a major Hollywood studio
Adoption of ZOO's tools by Sony Pictures
Significant US presence created through acquisition of Scope Seven
Exposure to new markets following launch of the Media Adaptation Tool, which enables the automated regionalization and size adaptation of print, packaging and marketing materials, which is already generating significant new revenue streams
Financial highlights
Announcement of proposed fundraising by way of a placing of ordinary shares to raise £512,000 before expenses to augment working capital
Turnover, excluding Scope Seven, increased by 28% to £1.9 million (2007: £1.5 million)
Loss before interest, tax, depreciation and amortisation increased to £1.4 million (2007: £0.9 million) due to planned investment
Encouraging start to the new financial year with technology licensing sales up significantly compared to the same period last year
The Group has generated a trading profit for the first five months of the new financial year
Stuart Green, CEO of ZOO Digital Group plc said "The past year has been one of transition and we are pleased with the progress we have made. Through the acquisition of Scope Seven we have created a compelling offering for US markets, combining technology with service and increasing our resources and presence close to our core studio customers in Hollywood. This has been a key factor in the winning of a 15 year contract and in the wider adoption of ZOO's tools".
| For further enquiries please contact: | |
| ZOO Digital Group plc | Tel: 0114 241 3700 |
| Stuart Green - Chief Executive Officer | |
| Helen Gilder - Group Finance Director | |
| KBC Peel Hunt Ltd | Tel: 020 7418 8900 |
| Richard Kauffer/Daniel Harris | |
| Weber Shandwick Financial | Tel: 020 7067 0700 |
| Nick Dibden/John Moriarty |
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report a year of significant progress for ZOO during which the focus of the Board has been on transitioning the business to allow us to maximise the return on the technological investments of the past few years. We have continued to focus on Hollywood-based organisations and determined that growth would be accelerated through the broadening of the service component of our offering. We have achieved this through the acquisition of Scope Seven and are now able to combine our technology solutions with efficient production services and deliver a compelling and clearly differentiated proposition to our customers.
We have broadened our portfolio of products and services with the launch of the Media Adaptation Tool, which is already delivering significant additional revenue streams in the form of consulting, implementation and production services as well as technology licensing fees. This forms part of our strategy to build revenues through a wide and robust mix of value-added services.
I am particularly delighted with a significant software licensing and services contract that we completed with a major Hollywood studio that provides commitments over the 15 year term of the agreement. This is one example of how our business proposition to help customers improve productivity and reduce their costs is becoming increasingly attractive in the current challenging economic climate.
Financial review
Our financial results reflected planned investment and the costs of integrating Scope Seven. Loss before interest, tax, depreciation and amortisation was £1.37 million (2007: £940,000).
Revenues from Scope Seven initially fell short of expectations as the business transitioned from serving studios via GDMX, an intermediary, to pursuing instead direct relationships. For the future, this transition is advantageous to ZOO as the GDMX relationship restricted us from dealing directly with several studios and we have since been able to replace the revenues with business from a broader base of clients. By the end of the year, revenue had recovered to the level anticipated at the time of the acquisition.
I am pleased to report a like for like increase in turnover of 28% to £1.9 million for technology licensing (2007: £1.5 million). The loss for the year from the technology division was reduced to £191,000 (2007: £322,000).
The cash balance has reduced during the year ended 31 March 2008 from £2.0 million to £675,000. We have undertaken a restructuring of the business to ensure that we remain efficient and we continue to operate rigorous cost controls. Recent months' sales have shown increases to existing customers as well as the provision of products and services to new customers. In addition, since the majority of ZOO's revenues are paid in US dollars, we have benefited from the recent exchange rate movements. We are pleased to report the Group has generated a trading profit for the first five months of the new financial year with sales and costs being in line with our plans. To strengthen the balance sheet we have announced a proposal to raise additional funds from our existing major shareholders through a placing of ordinary shares as described below.
The results for the 12 months ended 31 March 2008 are reported under IFRS for the first time. Overall moving from UK GAAP to IFRS has had no significant impact on the reported results in the current period. It had a significant impact on the results for last year through the changes in revenue recognition and the treatment of goodwill. In total the loss for the year ended 31 March 2007 was reduced by £819,000. An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position, income statement and cash flows is set out in note 35.
Proposed placing of new ordinary shares
We have also, today, announced a proposal for a capital raising by way of the placing of 3,413,333 new ordinary shares at a placing price of 15p each to raise approximately £512,000 before expenses which will be used to augment ZOO's working capital requirements. This placing price represents a premium of 25% over the closing middle market price of 12p per ordinary share as at 3 September 2008 being the last business day before the date of the announcement.
I am delighted to report that our CEO, Stuart Green, and two of our major shareholders, Herald Investment Management Limited and South Yorkshire Investment Fund, have demonstrated their support of the Group by committing to subscribe to the placing.
Full details on the proposed placing are contained in a separate announcement.
Trading Overview
The acquisition of Scope Seven has proved very positive in terms of the Group's strategic position. This business is now fully integrated into the Group with both Scope Seven and ZOOtech benefiting from the experience, knowledge and client base of the other. We are now able to offer our clients the choice of licensing our software tools or using our software-enabled service facility. The direct relationships we have been able to establish with a number of major Hollywood studios have enabled us to perform a greater range of work. Particularly encouraging is the speed with which work has built up with new clients and the very high standards of work quality that we consistently deliver. Following the adoption of Blu-ray as the industry format for next generation home video the Group is well positioned to benefit from the increase in titles being produced for this platform through the unique software solutions that we have been developing.
A new tool in our portfolio, the Media Adaptation Tool, was released in March 2008. This tool, which offers our customers the opportunity to automate the regionalisation and size adaptation of any print artwork, is already generating significant revenues and opens up new markets and business sectors for ZOO's products and services. Its availability was a key factor in securing the long term contract with a major Hollywood studio. The contract also covers ZOOtech's existing products which are considered to be proven solutions and are used in the production of the vast majority of the studio's DVD titles. The contract is for a period of 15 years with break points every five years. Our Templated Authoring System has been adopted by Sony Pictures and is under evaluation by other studios.
The UK interactive DVD market has declined in the past twelve months, confirming our decision two years ago to dispose of the Group's publishing activity in this market. However, we have enjoyed a growth in interactive DVD production work in the USA from customers that include major toy companies who have increased their publishing activity. Scope Seven is regarded as a leading production services supplier in this market and we have secured the position of preferred vendor with a number of these major customers.
Staff
As a Board, we recognise that it is the dedication, quality and enthusiasm of ZOO's employees that underpins the success of the Group. We do not underestimate the skills and talents that our people bring, and on behalf of the Board, I would like to thank the Group's management and staff for their hard work and commitment throughout the year.
Outlook
The Group has excellent technology, delivers highly regarded services and enjoys strong relationships with major Hollywood studios. From this base we intend to build a strong and profitable business.
Our patented technologies and innovative ideas give our clients potential for significant cost savings and greater speed to market. We continue to work closely with our clients to develop future tools and we have a number of new products in the pipeline. We are very excited by the opportunities around the Blu-ray platform and continue to invest in research and development.
The current financial year has started well with technology sales showing a significant increase over the same period in the previous year. Scope Seven continues to build its client base. As a Group we have been pleased to achieve a trading profit for the first five months of the new financial year. We will update the market further on current trading at ZOO's AGM on 6 October 2008.
Dr C H B Honeyborne
Chairman
| ZOO Digital Group plc | |||
| Annual Report and Accounts 2008 | |||
| CONSOLIDATED INCOME STATEMENT | |||
| for the year ended 31 March 2008 | |||
| 2008 | 2007 | ||
| Note | £000 | £000 | |
| Revenue | 5 | 3,264 | 4,206 |
| Cost of Sales | (27) | (1,404) | |
| Gross Profit | 3,237 | 2,802 | |
| Other operating income | 6 | 100 | 117 |
| Other operating expenses | (4,711) | (3,857) | |
| Loss before interest, tax, depreciation and amortisation | (1,374) | (938) | |
| Restructuring costs | - | (94) | |
| Depreciation | (152) | (127) | |
| Amortisation and impairment | (227) | (83) | |
| Exceptional items | 17 | (175) | 310 |
| Total operating expenses | 9 | (5,265) | (3,851) |
| Operating Loss | (1,928) | (932) | |
| Finance income | 7 | 72 | 53 |
| Finance cost | 8 | (327) | (185) |
| Loss before taxation | (2,183) | (1,064) | |
| Tax on loss | 13 | 135 | - |
| Loss for the year | (2,048) | (1,064) | |
| Continuing operations | (1,837) | (1,338) | |
| Discontinued operations | 16 | (211) | 274 |
| Loss for the year | (2,048) | (1,064) | |
| Attributable to equity holders of the parent | (2,048) | (1,064) | |
| Loss per share | |||
| - basic | (15.72p) | (20.89p) | |
| - diluted | (15.72p) | (20.89p) | |
| Loss per share - continuing operations | |||
| - basic | (14.1p) | (26.27p) | |
| - diluted | (14.1p) | (26.27p) |
| ZOO Digital Group plc | |||
| Annual Report and Accounts 2008 | |||
| CONSOLIDATED BALANCE SHEET | |||
| as at 31 March 2008 | |||
| 2008 | 2007 | ||
| Note | £000 | £000 | |
| ASSETS | |||
| Non-Current Assets | |||
| Intangible assets | 19 | 4,042 | 2,357 |
| Property, plant and equipment | 18 | 567 | 142 |
| 4,609 | 2,499 | ||
| Current Assets | |||
| Inventories | 20 | 188 | - |
| Trade receivables and other receivables | 21 | 1,238 | 1,764 |
| Current tax assets | 90 | 53 | |
| Cash and cash equivalents | 675 | 2,026 | |
| 2,191 | 3,843 | ||
| Total Assets | 6,800 | 6,342 | |
| LIABILITIES | |||
| Current Liabilities | |||
| Trade payables and other payables | 27 | (1,621) | (2,336) |
| Borrowings | 26 | (270) | - |
| (1,891) | (2,336) | ||
| Non-current Liabilities | |||
| Borrowings | 26 | (3,275) | (3,013) |
| (3,275) | (3,013) | ||
| Total Liabilities | (5,166) | (5,349) | |
| Net Assets | 1,634 | 993 | |
| EQUITY | |||
| Equity attributable to equity holders of the parent | |||
| Called up share capital | 23 | 2,687 | 887 |
| Share premium account | 23 | 23,030 | 22,102 |
| Other reserves | 25 | 8,598 | 8,598 |
| Share option reserve | 25 | 54 | 326 |
| Convertible loan note reserve | 25 | 266 | 266 |
| Foreign exchange translation | 25 | 56 | 82 |
| Profit and loss account | 24 | (33,055) | (31,192) |
| 1,636 | 1,069 | ||
| Interest in own shares | 23 | (2) | (76) |
| Attributable to equity holders | 1,634 | 993 |
| ZOO Digital Group plc | |||
| Annual Report and Accounts 2008 | |||
| CONSOLIDATED CASH FLOW STATEMENT | |||
| for the year ended 31 March 2008 | |||
| 2008 | 2007 | ||
| Note | £000 | £000 | |
| Cash flows from operating activities | |||
| Operating Loss for the year | (1,928) | (932) | |
| Finance income | 7 | 72 | 53 |
| Depreciation | 18 | 152 | 127 |
| Amortisation & Impairment | 19 | 227 | 83 |
| Share based payments | 11 | (87) | (49) |
| Disposal of own shares | 23 | 74 | 14 |
| Disposal of intangible assets | 19 | 7 | - |
| Disposal of property, plant and equipment | 18 | 53 | - |
| Changes in working capital: | - | - | |
| Inventories | 20 | (188) | 48 |
| Trade and other receivables | 21 | 566 | 682 |
| Trade and other payables | 27 | (975) | (1,239) |
| Cash flow from operations | (2,027) | (1,213) | |
| Tax received | 98 | - | |
| Net cash flow from operating activities | (1,929) | (1,213) | |
| Investing Activities | |||
| Acquisition of subsidiary | 29 | (1,536) | - |
| Purchase of intangible assets | 19 | (310) | (379) |
| Purchase of property, plant and equipment | 18 | (2) | 19 |
| Net cash flow from investing activities | (1,848) | (360) | |
| Cash flows from financing activities | |||
| Repayment of borrowings | 26 | (10) | - |
| Finance cost | 8 | (232) | (129) |
| Share and convertible loan issues | 23 | (272) | (398) |
| Issue of Share capital | 23 | 3,000 | 820 |
| Issue of Convertible loan stock | 25 | - | 3,541 |
| Net cashflow from financing | 2,486 | 3,834 | |
| Net decrease in cash and cash equivalents | (1,291) | 2,261 | |
| Cash and cash equivalents at the beginning of the year | 2,026 | (317) | |
| Exchange (loss)/gain on cash and cash equivalents | (60) | 82 | |
| Cash and cash equivalents at the end of the year | 22 | 675 | 2,026 |
| ZOO Digital Group plc | |||
| Annual Report and Accounts 2008 | |||
| CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE | |||
| for the year ended 31 March 2008 | |||
| 2008 | 2007 | ||
| Note | £000 | £000 | |
| Exchange difference on the translation of foreign operations | 25 | (26) | 82 |
| Net (expense)/ income recognised directly in equity | (26) | 82 | |
| Loss for the financial year | (2,048) | (1,064) | |
| Total recognised expense for the year | (2,074) | (982) | |
| Attributable to equity holders of the company | (2,074) | (982) | |
ZOO Digital Group plc
Annual Report and Accounts 2008
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2008
General Information
ZOO Digital Group plc ('the company') and its subsidiaries (together 'the Group') provide productivity tools and services for the video post-production 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.
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, and in preparing an opening IFRS balance sheet at 1 April 2006 for the purpose of transition to IFRS.
2.1 Basis of preparation
These financial statements have been prepared for the first time in accordance with IFRS as adopted by the European Union, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in Note 35.
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 income statement for the parent company has not been presented as permitted by section 230 (4) of the Companies Act 1985.
The directors have prepared trading and cash flow forecasts for the group for the period to 30 September 2009. Recent months sales figures have shown increases in the group's sales to its existing customers, and an encouraging roll out of products to new customers. The forecasts assume, inter alia, that sales of existing products to existing and new customers will continue to increase, and the directors have had informal indications from 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 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.
2.1.1 Adoption of standards effective during the year ending 31 March 2008
The following standards have been applied by the group from 1 April 2007:
- IFRS 7 Financial Instruments: Disclosures
- IAS 1 (Amendment) Capital Disclosures
The application of IFRS 7 and IAS 1 (Amendment) in the year to 31 March 2008 have not affected the balance sheet or income statement as the standards are concerned with disclosure only.
2.1.2 EU adopted IFRS not yet applied
The following IFRS was available for early adoption but has not yet been applied by the group in these financial statements:
- IFRS 8 Operating Segments for years commencing on or after 1 January 2009.
The application of IFRS 8 in the year ended 31 March 2008 would not have affected the balance sheet or income statement as the standard is concerned only with disclosure.
2.1.3 Exemptions taken on first time adoption of IFRS 1
Business combinations: The group has applied the exemption from retrospectively recalculating goodwill which arose on acquisitions prior to 1 April 2006. This goodwill is included at its deemed cost, being the amount recorded under UK GAAP as at 1 April 2006 following an impairment review.
Share based payment transactions: The group has elected to apply IFRS 2 Share based payments only to awards of equity instruments made after 7 November 2002 that had not vested by 1 April 2006.
2.2 Consolidation
Subsidiaries are all entities over which the group has the power to govern the financial and operating policies so as to obtain benefit from their activities. Subsidiaries are fully consolidated from the date on which control is transferred until the date that control ceases.
The consolidated financial statements of ZOO Digital Group plc include the results of the Company and its subsidiaries. Subsidiary accounting policies are amended where necessary to ensure consistency within the Group and intra group transactions are eliminated on consolidation.
2.3 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.
2.4 Foreign currency translation
2.4.1 Functional and presentation currency
Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling which is the company's functional and presentation currency.
2.4.2 Transactions and balances
Transactions in foreign currencies are recorded at the rate of exchange at the date 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.
2.4.3 Group companies
The results and financial position of all group entities that have 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 balance sheet date;
-income and expenses for each income statement are translated at the average monthly exchange rate for the month in which the income or expense arose and all resulting exchange rate differences are recognised as a separate component of equity.
2.5 Intangible assets
2.5.1 Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
In accordance with IFRS 1, the group has applied the exemption from retrospectively recalculating goodwill which arose on acquisitions prior to 1 April 2006. This is included at its deemed cost, being the amount recorded under UK GAAP as at 1 April 2006.
2.5.2 Patent and Trademark Costs
Patent and trademark costs are stated at cost, net of amortisation and any provision for impairment. Patents and trademarks have a finite useful life and amortisation is charged on a straight line basis over the estimated useful economic life (10 years).
2.5.3 Research and Development costs
Research expenditure is charged to the profit and loss account in the period in which it is incurred. Development costs are recognised as an intangible asset if they fulfil the following criteria:
- it is technically feasible to complete the intangible asset so that it will be available for use;
- management intends to complete the intangible asset and use or sell it;
- there is an ability to use or sell the intangible asset;
- it can be demonstrated how the intangible asset will generate probable future economic benefits;
- there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;
- the expenditure attributable to the intangible asset during its development can be reliably measured.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Development costs recognised as an intangible asset are amortised on a straight line basis over 3 years or the length of any current sales contracts, from the point at which the asset is ready for sale or use.
During the year the company changed its basis of estimate for the amortisation of development costs. If the accounting policy had remained the same as in previous years the amortisation charge for the year would have been £179,976 resulting in a net book value of £407,824.
2.5.4 Computer Software
Acquired computer software is shown at historical cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight-line basis over 3 years from the date the asset is available for use.
Costs that are directly associated with the development of identifiable and unique software products controlled by the group, and are expected to generate economic benefits exceeding costs beyond one year, are recognised as development costs within intangible assets. See note 2.5.3 Research and Development costs.
2.6 Property, plant and equipment
All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation is provided on all such assets at rates calculated to write off the cost of each asset less estimated residual value, on a straight-line basis, over its expected useful life, as follows:
| - Leasehold improvements | 5 years or over the term of the lease, if shorter |
| - Computer hardware | between 2 and 3 years |
| - Office equipment, fixtures and fittings | between 2 and 5 years |
2.7 Impairment of assets
The group assesses at each balance sheet date whether there is any indication that any of its assets have been impaired. If such indication exists, the asset's recoverable amount is estimated and compared to its carrying value.
For goodwill, intangible assets that have an indefinite life and intangible assets not yet available for use, the recoverable amount is estimated at each balance sheet date and whenever there is an indication of impairment an impairment loss is recognised for the amount by which the asset's carrying value amount exceeds its recoverable amount. Impairment losses are recognised in the income statement.
2.8 Financial Instruments
The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual agreement.
Financial instruments are recognised on the balance sheet at fair value when the group becomes a party to the contractual provisions of the instrument.
2.8.1 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.
The convertible loan notes are accounted for in accordance with IAS 32 'Financial Instruments:presentation' and split between debt and equity based upon the market rate of similar loans not carrying conversion options.
2.8.2 Trade receivables
Trade receivables are stated at their amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts. They are recognised on the trade date of the related transactions. Subsequent recoveries of amounts previously written off are credited to the income statement.
2.8.3 Trade payables
Trade payables are stated at their amortised cost. They are recognised on the trade date of the related transactions.
2.9 Share based payments
The group has applied the exemption available under IFRS 1 and elects to apply IFRS 2 only to awards of equity instruments made after 7 November 2002 that had not vested by 1 April 2006.
Options are measured at fair value at grant date using the binomial model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.
Under the group's share option scheme, share options are granted to directors and selected employees. The options are expensed in the period over which the share based payment vests. A corresponding increase to the share option reserve under shareholder's funds is recognised. When share options are exercised, or when share options are forfeited, cancelled or expire, the corresponding fair value is transferred to the profit and loss account. The group has no legal or constructive obligation to repurchase or settle the options in cash.
2.10 Pension costs and other post retirement benefits
The Group operates only defined contribution schemes and pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further obligations once the contributions have been paid. The amount charged to the profit and loss account in respect of pension costs and other post-retirement benefits is the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the balance sheet.
2.11 Revenue
Revenue comprises the consideration receivable for services provided, software usage fees and royalty income. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the group.
2.11.1 Sales of services
The group sells design, development and other services relating to the DVD production industry. These services are provided either on a time and material basis or as a fixed price contract.
Revenue from time and material contracts is recognised as labour hours and direct expenses are incurred, at the contracted rates.
Revenue from fixed price contracts is recognised in accordance with the substance of the contract as services are performed by the group and accepted by the customer.
If circumstances arise that may change the original estimates of revenue and costs or extent of progress toward completion, estimates are revised. These revisions resulting in increases or decreases in the estimated revenues and costs are reflected in income in the period in which the circumstances that give rise to the revision become known to management.
2.11.2 Software usage fees
Revenue attributable to the use of software products is credited to the profit and loss account in line with the usage of these products.
2.11.3 Royalty income
Under IAS 18 royalties are recognised on an accruals basis in accordance with the substance of the relevant agreement. Based on the substance of the contract agreements, revenue is recognised to match with estimated sales. Estimates of expected sales are reviewed at each balance sheet date.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all direct costs incurred and attributable production overheads. Net realisable value is based on estimated selling price allowing for all further costs of completion and disposal.
Product development expenditure is carried forward to the extent that it is considered to be recoverable. The amount carried forward is written off on release over the expected sales life of each product.
2.13 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease.
Leases of equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term.
2.14 Deferred taxation
Deferred tax, including UK corporation tax and foreign tax, is provided in full using the balance sheet liability method. Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown on the balance sheet. Deferred tax assets and liabilities are not recognised if they arise in the following situations; the initial recognition of goodwill; or the initial recognition of assets and liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
The group does not recognise deferred tax liabilities, or deferred tax assets, on temporary differences associated with investments in subsidiaries, joint ventures and associates as it is not considered probable that the temporary differences will reverse in the foreseeable future. It is group's policy to reinvest undistributed profits arising in group companies.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amount of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
2.15 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions.
Government grants relating to operating costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate.
Government grants relating to property, plant and equipment are credited to the cost of the asset and released to the income statement on a straight line basis over the expected lives of the related assets.
2.16 Exceptional items
Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the group's financial performance. Transactions which may give rise to exceptional items are principally gains and losses on disposal of operations or restructuring provisions.
3. Accounting estimates and judgements
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
3.1 Critical accounting estimates and assumptions
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Goodwill
Goodwill is tested annually for impairment at the balance sheet date. The recoverable amounts of cash generating units have been estimated based on value in use calculations. Value in use calculations have been based on a subjective pre-tax discount rate of 8%. No impairment loss incurred at this discount rate. Had the discount rate used been 1% greater or lower than estimated, there still would be no impact on impairment.
Financial Instruments
Discounted cash flow analysis is used to determine the fair value of financial instruments that are not traded on the open market. Calculations have been based on a subjective pre-tax discount rate of 8%. Had the discount rate used been 1% greater or lower than estimated, then the change in fair value would have been decreased by £109,000, or increased by £115,000 respectively.
3.2 Critical judgements in applying the group's accounting policies
Operating lease commitments
The group has entered into a property lease for its Sheffield offices. As management have determined that the group has not obtained substantially all the risks and rewards of ownership of the property, the lease has been classified as an operating lease and accounted for accordingly.
4. Segmental reporting
Primary reporting format - Business segments
At 31 March 2008, the group is organised on a worldwide basis into two main business segments:
- Software development and consultancy
- Media production and design
These divisions are the basis on which the group reports its primary segment information. Other group operations comprise of head office operations.
The segment results are as follows:
| Software Development | Media Production | Group | ||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Total Revenue | 2,038 | 1,781 | 1,710 | 2,715 | 3,748 | 4,496 |
| Inter-segment revenue | (129) | (290) | (355) | - | (484) | (290) |
| Revenue | 1,909 | 1,491 | 1,355 | 2,715 | 3,264 | 4,206 |
| Segment result | (191) | (322) | (661) | 274 | (852) | (48) |
| Unallocated corporate expenses | (1,076) | (884) | ||||
| Operating loss | (1,928) | (932) | ||||
| Finance income | 72 | 53 | ||||
| Finance cost | (327) | (185) | ||||
| Loss before taxation | (2,183) | (1,064) | ||||
| Tax on loss | 135 | - | ||||
| Loss for the year | (2,048) | (1,064) | ||||
Other segmental information included in the income statement is as follows:
| Software Development | Media Production | Group Operations | ||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Depreciation | 44 | 40 | 76 | 35 | 32 | 52 |
| Amortisation | 57 | 75 | 20 | - | 8 | 8 |
| Impairment losses | 45 | - | 97 | - | - | - |
| Share based payments | - | - | - | - | (87) | 86 |
Segment assets consist primarily of property, plant and equipment, intangible assets, trade and other receivables and cash and cash equivalents.
Segment liabilities comprise operating liabilities. Unallocated liabilities comprise items such as borrowings.
Capital expenditure includes additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.
| Software Development | Media Production | Group | ||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Assets | 2,801 | 1,777 | 1,896 | 793 | 4,697 | 2,570 |
| Unallocated corporate assets | 2,103 | 3,772 | ||||
| Consolidated total assets | 6,800 | 6,342 | ||||
| Liabilities | 546 | 632 | 1,020 | 1,041 | 1,566 | 1,673 |
| Unallocated corporate liabilities | 3,600 | 3,676 | ||||
| Consolidated total liabilities | 5,166 | 5,349 | ||||
| Capital Expenditure | 358 | 418 | 1301 | - | 29 | 5 |
Secondary reporting format - geographical segments
The Group's operating divisions operate in two principal geographical areas of the world, the UK and the US. During the year the Group closed its subsidiary located within France. All other European operations are run from the UK office.
| Revenue | Assets | Additions to property, plant and equipment, and intangible assets | ||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| United Kingdom | 328 | 2,113 | 4,483 | 1,906 | 381 | 421 |
| Other EU Countries | 143 | 222 | (202) | 32 | 1,307 | - |
| US | 2,793 | 1,871 | (2,647) | (945) | - | 2 |
| 3,264 | 4,206 | 1,634 | 993 | 1,688 | 423 | |
Discontinuing operations
In the year ended 31 March 2007, the Group exited its UK-based video publishing activity through the sale of the assets of ZOO Interactive Video Ltd. The results for this activity were therefore reported as discontinued operations. Through the acquisition of Scope Seven in August 2007, the Group was involved in video production services in the year ended 31 March 2008 and for this reason we have re-categorised the exited ZIV business as a continued operation. The segment result is a loss of £661,000 for 2008 as a continuing operation (2007: Profit of £274,000 as a discontinued operation).
During the year the Group closed the French office to concentrate on greater opportunites that exist in the US. These discontinued operations are included within Software Development. The loss for the year of these operations was £211,000 (2007: Profit of £15,000).
5. Revenue
The group's revenue comprises:
| 2008 | 2007 | |
| £000 | £000 | |
| Software Development | 1,909 | 1,491 |
| Media Production | 1,355 | 2,715 |
| 3,264 | 4,206 | |
| Continuing operations | 3,264 | 1,491 |
| Discontinued operations | - | 2,715 |
| 3,264 | 4,206 | |
| Revenue from services | 2,456 | 752 |
| Royalty income | 808 | 3,454 |
| 3,264 | 4,206 |
6. Other operating income
| 2008 | 2007 | |
| £000 | £000 | |
| Government grants | 100 | 117 |
7. Investment income
| 2008 | 2007 | |
| £000 | £000 | |
| Interest on short term deposits | 72 | 53 |
8. Finance costs
| 2008 | 2007 | |
| £000 | £000 | |
| Interest on bank overdraft | - | (32) |
| Interest on borrowings | (327) | (153) |
| (327) | (185) |
9. Operating loss
Group operating loss for the year is stated after charging/(crediting) the following:
| 2008 | 2007 | |
| £000 | £000 | |
| Exchange gains or losses | (43) | (164) |
| Staff Costs | 3,035 | 2,148 |
| Depreciation | 152 | 127 |
| Amortisation of other intangible assets | 90 | 83 |
| Impairment losses on other intangible assets | 137 | - |
| Research and non-capitalised development costs | 797 | 748 |
| Operating lease expense | 290 | 185 |
| Auditor's remuneration | 78 | 79 |
| Restructuring costs | - | 94 |
| Exceptional items (note 17) | 175 | (310) |
| Other expenses | 554 | 861 |
| Other operating expenses | 5,265 | 3,851 |
10. Auditor's remuneration
| 2008 | 2007 | |
| £000 | £000 | |
| Fees payable to group's auditor for the audit of the group's annual financial statements | 21 | 23 |
| The audit of the group's subsidiaries, pursuant to legislation | 24 | 6 |
| Other services pursuant to legislation | - | 3 |
| Tax services | 24 | 20 |
| Services in relation to corporate finance transactions | - | 25 |
| All other services | 9 | 2 |
| 78 | 79 |
11. Staff costs
The average number of employees (including executive directors) was:
| 2008 | 2007 | |
| No. | No. | |
| Product design | 67 | 46 |
| Sales and marketing | 9 | 9 |
| Administration | 13 | 12 |
| 89 | 67 |
Their aggregate remuneration comprised:
| 2008 | 2007 | |
| £000 | £000 | |
| Wages and salaries | 2,606 | 1,717 |
| Social security costs | 458 | 276 |
| Other pension costs | 58 | 69 |
| Share based payments | (87) | 86 |
| 3,035 | 2,148 |
The group pension arrangements are operated through a defined contribution scheme.
12. Directors' remuneration, interests and transactions
Aggregate remuneration
Directors' remuneration comprised:
| 2008 | 2007 | ||||
| Salary | Benefits | Pension | Total | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Dr Stuart A Green | 115 | 1 | 6 | 122 | 122 |
| Helen P Gilder (1) | 85 | 1 | 4 | 90 | 44 |
| Ian C Stewart | 15 | - | - | 15 | 67 |
| Robert G Deri (2) | - | - | - | - | 175 |
| Andrew Scrivener (3) | - | - | - | - | 46 |
| M John Barnes (4) | - | - | - | - | 8 |
| 215 | 2 | 10 | 227 | 462 |
(1) Appointed 29 September 2006. (2) Resigned 16 January 2007. (3) Resigned 03 October 2006. (4) Resigned 27 September 2006.
In addition to the above, £20,000 (2007: £12,000) was paid to Brockhill Limited under agreements to provide the group with the services of Dr Christopher H B Honeyborne. £20,000 (2007: £10,000) was paid to Foresight Group for the services of Matthew P Taylor.
The balance owing to Brockhill Limited at 31 March 2008 was £3,000 (2007: £1,000). The balance owing to Foresight Group at 31 March 2008 was £6,000 (2007: £13,000).
Two directors (2007: five) serving during the year have been members of money purchase pension schemes.
The highest paid director received emoluments and benefits as follows:
| 2008 | 2007 | |
| £000 | £000 | |
| Emoluments | 116 | 116 |
| Money purchase pension contributions | 6 | 6 |
| 122 | 122 |
The highest paid director did not exercise any share options or received or was due any shares in the year. As at 31 March 2008 no amounts, in respect of services performed as a director, were due.
Compensation of key management personnel (including directors)
| 2008 | 2007 | |
| £000 | £000 | |
| Short-term employee benefits | 475 | 387 |
| Post-employment benefits | 10 | 27 |
| Termination benefits | 215 | 154 |
| Share based payments | (43) | 88 |
| 657 | 656 |
Directors' share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the company granted to or held by the directors. Details of the options are as follows:
| Name of director | 1 April 2007 | Granted during the year | Surrendered during the year | 31 March 2008 | Exercise price | Date from which exercisable | Expiry date |
| Dr Christopher H B Honeyborne | 267 | - | (267) | - | £63.75 | September-01 | March-10 |
| Dr Christopher H B Honeyborne | 2,667 | - | (2,667) | - | £5.81 | July-04 | July-11 |
| Dr Christopher H B Honeyborne | 3,333 | - | (3,333) | - | £8.25 | April-07 | July-14 |
| Dr Christopher H B Honeyborne | - | 30,000 | - | 30,000 | £0.27 | * | August-17 |
| Dr Stuart A Green | 16,667 | - | (16,667) | - | £7.88 | April-07 | April-14 |
| Dr Stuart A Green | 13,333 | - | (13,333) | - | £7.88 | July-08 | July-15 |
| Dr Stuart A Green | - | 175,000 | - | 175,000 | £0.27 | * | August-17 |
| Helen P Gilder | 800 | - | (800) | - | £37.50 | September-01 | March-10 |
| Helen P Gilder | 4,000 | - | (4,000) | - | £5.81 | July-04 | July-11 |
| Helen P Gilder | 4,000 | - | (4,000) | - | £2.06 | April-05 | April-13 |
| Helen P Gilder | 5,333 | - | (5,333) | - | £7.88 | July-08 | July-15 |
| Helen P Gilder | - | 450,000 | - | 450,000 | £0.27 | * | August-17 |
| Ian C Stewart | - | 30,000 | - | 30,000 | £0.27 | * | August-17 |
| 50,400 | 685,000 | (50,400) | 685,000 |
\* These directors' share options are conditionally exercisable from 31 August 2008 and the percentage of shares that can be exercised is staggered. The exercise is staggered over the exercise period with typically 40% exercisable after the first year and a further 30% in each of the following two years.
The credit to the profit and loss account in respect of directors' share options amounted to £53,000 (2007: credit £76,000). These credits are due to the surrendering of unexercised share options.
The market price of the ordinary shares at 31 March 2008 was 17.1p and the range during the year was 50.0p (high) to 15.0p (low).
Directors' interests
The directors who held office at 31 March 2008 had the following interests, including family interests, in the 15p ordinary shares of ZOO Digital Group plc:
| 2008 | 2007 | |
| Name of director | Beneficial | Beneficial |
| Dr Christopher H B Honeyborne | 1,333 | 1,333 |
| Dr Stuart A Green | 2,746,502 | 206,502 |
| Helen P Gilder | 226 | 226 |
| Ian C Stewart | 1,675,365 | 875,365 |
| Matthew P Taylor | - | - |
The directors also had the following interest in 6% unsecured convertible loan stock at 31 March 2008:
| £000 | |
| Dr Christopher H B Honeyborne | 4 |
| Dr Stuart A Green | 342 |
| Helen P Gilder | - |
| Ian C Stewart | 270 |
| Matthew P Taylor | - |
On 10 April 2008 Dr Stuart A Green purchased an additional 100,000 shares. As a consequence, Dr Green's shareholding in the Company, including family interests, is 2,846,502 shares representing 15.89% of the existing share capital of the Company.
Dr Stuart A Green has also committed to subscribe to a further 1,333,333 shares which will take his shareholding from 15.9% to 19.6%.
No other changes took place in the interests of directors between 31 March 2008 and 31 July 2008.
Matthew Taylor has a non beneficial interest in both shares and loan notes as a partner within Foresight Group.
No other transactions have taken place with directors aside from those disclosed in this note 12.
13. Income tax expense
13.1 Current tax:
| 2008 | 2007 | |
| £000 | £000 | |
| UK corporation tax | ||
| - Current tax on income for the year | - | - |
| - Adjustments in respect of prior years | - | - |
| Foreign tax | - | - |
| - | - |
Corporation tax is calculated at 30% (2007:30%) of the estimated assessable profit for the year.
13.2 Tax charge for the year
The tax charge for the year can be reconciled to the profit for the year as follows:
| 2008 | 2007 | |
| £000 | £000 | |
| Profit before tax | (2,183) | (1,064) |
| Tax calculated at standard rate of corporation tax of 30% | (655) | (319) |
| Depreciation in excess of capital allowances | 179 | 143 |
| Disallowable items | 262 | (4) |
| Losses carried forward | 214 | 180 |
| Foreign tax charged at lower rates the UK standard rate | - | - |
| Research and development tax credit | 135 | - |
| Tax Credit | 135 | - |
13.3 Tax losses carried forward
The group has tax losses carried forward of approximately £16,000,000 (2007: £16,000,000).
13.4 Current tax assets
| 2008 | 2007 | |
| £000 | £000 | |
| Research and development tax credit | 90 | 53 |
14. Dividends
There were no dividends paid or proposed.
15. Loss per share
Earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.
No adjustment has been made for 'in money' share options as this would decrease the loss per share, which is not dilutive. No adjustment has been made for 'out of the money' share options based on the assumption that optionholders would not exercise these options.
| Basic and Diluted | ||
| 2008 | 2007 | |
| £000 | £000 | |
| Continued operations | 1,837 | 1,338 |
| Discontinued operations | 211 | (274) |
| Loss for the financial year | 2,048 | 1,064 |
| 2008 | 2007 | |
| Number of shares | Number of shares | |
| Weighted average number of shares for basic & diluted loss per share | 13,030,659 | 5,092,801 |
The loss/(profit) per share on discontinued activities is as follows:
| 2008 | 2007 | |
| Basic | 1.62p | (5.38)p |
| Diluted | 1.62p | (5.38)p |
16. Discontinued operations
16.1 Income statement
| 2008 | 2007 | |
| £000 | £000 | |
| Revenue | - | 2,715 |
| Expenses | (211) | (2,441) |
| Loss/(profit) before tax of discontinued operations | (211) | 274 |
| Income tax expense | - | - |
| (Loss)/profit after tax of discontinued operations | (211) | 274 |
16.2 Cash flow movements
| 2008 | 2007 | |
| £000 | £000 | |
| Operating | 5 | (239) |
| Investing | - | 89 |
| Financing | - | - |
| 5 | (150) |
16.3 Analysis of assets and liabilities
| 2008 | 2007 | |
| £000 | £000 | |
| Property, plant and equipment | - | - |
| Goodwill | - | - |
| Other Intangible assets | - | - |
| Inventory | - | - |
| Other current assets | 12 | 1,093 |
| 12 | 1,093 | |
| Other current liabilities | (214) | (5,889) |
| Current - provisions | - | - |
| (214) | (5,889) |
17. Exceptional items
On the 3 October 2006 the group disposed of the trade and assets of its interactive DVD production business for a consideration of £200,000. The profit on disposal of the operation was £310,000. In March 2008 the company, to which the trade and assets were sold, went into liquidation with £175,000 of the consideration still outstanding. The group is in discussions with the liquidators to recover the amounts due, however a provision has been made for full write off of the outstanding amount.
18. Property, plant and equipment
| Production Equipment | Leasehold improvements | Computer hardware | Office equipment, fixtures & fittings | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Cost | |||||
| Opening cost at 1 April 2006 | - | 12 | 676 | 371 | 1,059 |
| Additions | - | - | 32 | 1 | 33 |
| Disposals | - | - | (97) | (21) | (118) |
| Acquired through business combination | - | - | - | - | - |
| Opening cost at 1 April 2007 | - | 12 | 611 | 351 | 974 |
| Additions | 55 | 2 | 63 | 33 | 153 |
| Disposals | - | (12) | - | (125) | (137) |
| Acquired through business combination | 11 | 222 | 149 | 95 | 477 |
| Closing cost at 31 March 2008 | 66 | 224 | 823 | 354 | 1,467 |
| Accumulated depreciation/ impairment | |||||
| Opening balance at 1 April 2006 | - | 11 | 525 | 228 | 764 |
| Depreciation | - | 1 | 77 | 49 | 127 |
| Disposals | - | - | (44) | (15) | (59) |
| Impairment loss | - | - | - | - | - |
| Opening balance at 1 April 2007 | - | 12 | 558 | 262 | 832 |
| Depreciation | 11 | 30 | 77 | 34 | 152 |
| Disposals | - | (12) | - | (72) | -84 |
| Impairment loss | - | - | - | - | - |
| Closing balance at 31 March 2008 | 11 | 30 | 635 | 224 | 900 |
| Opening carrying value at 1 April 2006 | - | 1 | 151 | 143 | 295 |
| Opening carrying value at 1 April 2007 | - | - | 53 | 89 | 142 |
| Closing carrying value at 31 March 2008 | 55 | 194 | 188 | 130 | 567 |
Depreciation expense of £152,000 (2007: £127,000) is included in 'Other operating expenses'.
Property, plant and equipment for the group includes the following amounts where the group is a lessee under a finance lease at 31 March 2008:
| Production Equipment | Computer hardware | Office equipment, fixtures & fittings | Total | |
| £000 | £000 | £000 | £000 | |
| Cost - capitalised finance leases | 39 | 104 | 70 | 213 |
| Accumulated depreciation | (1) | (20) | (9) | (30) |
| Net book value | 38 | 84 | 61 | 183 |
There were no assets held under finance leases at 31 March 2007.
19. Intangible assets
| Goodwill | Development Costs | Patents and trademarks | Computer Software | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Cost | |||||
| Opening cost at 1 April 2006 | 10,423 | 528 | 231 | 119 | 11,301 |
| Additions | - | 334 | 54 | 2 | 390 |
| Disposals | - | (316) | - | (16) | (332) |
| Acquired through business combination | - | - | - | - | - |
| Opening cost at 1 April 2007 | 10,423 | 546 | 285 | 105 | 11,359 |
| Additions | - | 214 | 54 | 42 | 310 |
| Disposals | - | (11) | - | - | (11) |
| Exchange differences | 19 | 15 | - | - | 34 |
| Acquired through business combination | 842 | 688 | - | 45 | 1,575 |
| Closing cost at 31 March 2008 | 11,284 | 1,452 | 339 | 192 | 13,267 |
| Accumulated amortisation/ impairment | |||||
| Opening balance at 1 April 2006 | 8,828 | 316 | 31 | 72 | 9,247 |
| Amortisation | - | 71 | (5) | 17 | 83 |
| Disposals | - | (316) | - | (12) | (328) |
| Impairment loss | - | - | - | - | - |
| Opening balance at 1 April 2007 | 8,828 | 71 | 26 | 77 | 9,002 |
| Amortisation | - | 50 | 6 | 34 | 90 |
| Disposals | - | (4) | - | - | (4) |
| Impairment loss | - | 92 | 45 | - | 137 |
| Closing balance at 31 March 2008 | 8,828 | 209 | 77 | 111 | 9,225 |
| Opening carrying value at 1 April 2006 | 1,595 | 212 | 200 | 47 | 2,054 |
| Opening carrying value at 1 April 2007 | 1,595 | 475 | 259 | 28 | 2,357 |
| Closing carrying value at 31 March 2008 | 2,456 | 1,243 | 262 | 81 | 4,042 |
Development costs are internally generated software development costs. All other intangible assets are acquired externally.
The remaining life of the majority of development costs is 14 years.
During the year the company changed its basis of estimate for the amortisation of development costs. If the accounting policy had remained the same as in previous years the amortisation charge for the year would have been £179,976 resulting in a net book value of £407,824.
Following the decision by management not to renew or pursue some of the group's patent applications, £45,000 (2007: £nil) of previously capitalised patent costs was found to be impaired.
Changes in market expectations led to a management decision not to continue certain development projects. Capitalised costs relating to these projects were considered to be impaired. The amount of impairment was £92,000 (2007:£nil).
Amortisation and impairment costs are included within 'Amortisation and impairment' in the income statement.
Computer software includes the following amounts where the group is a lessee under a finance lease at 31 March 2008:
| Computer Software | ||
| £000 | ||
| Cost - capitalised finance leases | 38 | |
| Accumulated amortisation | (7) | |
| Net book value | 31 |
There were no assets held under finance leases at 31 March 2007.
Impairment tests for goodwill
Goodwill is subject to annual impairment testing, or more frequently if there are indications that goodwill might be impaired.The recoverable amount of a cash-generating unit is determined based on value-in-use calculations. The calculations use pre-tax cashflow projections which are based on financial budgets approved by management covering a five-year period. Management determined the budgets based on past performance and its expectations of market development.
Goodwill is allocated to the group's cash-generating units (CGUs) identified according to the business segment. Goodwill is allocated as follows:
| Software Development | Media Production | Group | |||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
| £000 | £000 | £000 | £000 | £000 | £000 |
| 1,595 | 1,595 | 861 | - | 2,456 | 1,595 |
Following the impairment tests, goodwill was considered not to be impaired.
Key assumptions
Discount rate
The discount rate used was 8%.
Cash flow growth rates
The cash flow growth rates are derived from forecast sales growth taking into consideration past experience of operating margins achieved in each cash generating unit.
Sensitivities
The group's impairment review is sensitive to changes in the key assumptions. Based on a sensitivity analysis a change of 5% in any one of the assumptions will not not cause any impairment of the group's CGUs.
20. Inventories
| 2008 | 2007 | |
| £000 | £000 | |
| Products in the course of development | 188 | - |
There was no cost of inventories recognised as an expense within 'cost of sales' during the year (2007:£48,000).
21. Trade receivables and other receivables
| 2008 | 2007 | |
| £000 | £000 | |
| Trade receivables | 826 | 895 |
| Less: provision for impairment of trade receivables | (71) | (323) |
| Trade receivables - net | 755 | 572 |
| Amounts owed by subsidiary undertakings | - | - |
| Royalty advances | - | 23 |
| VAT | 6 | - |
| Other debtors | 76 | 58 |
| Prepayments and accrued income | 401 | 1,111 |
| 1,238 | 1,764 |
The fair values of trade and other receivables equals their carrying amount.
As of the 31 March 2008, trade receivables of £321,000 (2007: £405,000) were overdue. The ageing analysis of these trade receivables is as follows:
| 2008 | 2007 | |
| £000 | £000 | |
| Less than 3 months | 207 | 185 |
| 3 to 6 months | 73 | 153 |
| 7 to 12 months | 35 | 65 |
| Over 12 months | 6 | 2 |
| 321 | 405 |
The carrying amounts of trade and other receivables are denominated in the following currencies:
| 2008 | 2007 | |
| £000 | £000 | |
| Pounds | 271 | 1,342 |
| US Dollars | 943 | 383 |
| Euros | 24 | 39 |
| 1,238 | 1,764 |
Provision for impairment of trade receivables:
| 2008 | |
| £000 | |
| At 1 April 2007 | 323 |
| Provision for receivables impairment | 27 |
| Receivables written off in the year as uncollectible | (246) |
| Unused amounts reversed | (33) |
| At 31 March 2008 | 71 |
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of Trade receivables, Royalty advances, Other debtors and cash and cash equivalents. The group does not hold any collateral as security.
22. Notes to the cash flow statement
22.1 Significant non-cash transactions
During the year the group acquired property, plant and equipment with a cost of £153,000 of which £46,000 was acquired by the means of finance leases. This does not include assets acquired as part of the acquisition of Scope Seven LLC as stated in note 29.
22.2 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 balance sheet amounts.
| 2008 | 2007 | |
| £000 | £000 | |
| Cash on hand and balances with banks | 675 | 2,026 |
23. Share capital and premium
| 2008 | 2007 | ||
| £000 | £000 | ||
| Authorised | |||
| 26,666,667 ordinary shares of 15p each | 4,000 | ||
| (2007: 14,666,667 ordinary shares of 15p each) | 2,200 | ||
| Allotted, called-up and fully paid | |||
| 17,913,089 ordinary shares of 15p each | 2,687 | ||
| (2007: 5,913,088 ordinary shares of 15p) | 887 | ||
| Reconciliation of the number of shares outstanding: | |||
| Opening balance | 5,913,089 | 4,231,038 | |
| Shares issued | 12,000,000 | 1,682,051 | |
| Closing balance | 17,913,089 | 5,913,089 | |
On 28 August 2007 12,000,000 ordinary shares of 15p were issued for consideration of £3,000,000.
| Ordinary shares | Share Premium | |
| £000 | £000 | |
| Balance at 1 April 2006 | 635 | 21,648 |
| Issue of shares | 252 | 568 |
| Issue costs | - | (114) |
| Balance at 31 March 2007 | 887 | 22,102 |
| Issue of shares | 1,800 | 1,200 |
| Issue costs | - | (272) |
| Balance at 31 March 2008 | 2,687 | 23,030 |
| Interest in own shares | £000 |
| Balance at 1 April 2006 | (89) |
| Disposal of own shares | 13 |
| Balance at 31 March 2007 | (76) |
| Disposal of own shares | 74 |
| Balance at 31 March 2008 | (2) |
24. Retained earnings
| Retained earnings | |
| £000 | |
| Balance at 1 April 2006 | (30,193) |
| Issue costs | 22 |
| Loss for the year | (1,064) |
| Share based payments | 43 |
| Balance at 31 March 2007 | (31,192) |
| Forfeited Share options | 185 |
| Loss for the year | (2,048) |
| Balance at 31 March 2008 | (33,055) |
25. Other reserves
| Translation reserve | Convertible loan reserve | Share option reserve | Other reserves | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Balance at 1 April 2006 | - | - | 418 | 8,598 | 9,016 |
| Issue of convertible loan stock | - | 266 | - | - | 266 |
| Share based payments | - | - | (92) | - | (92) |
| Foreign exchange translation adjustment | 82 | - | - | - | 82 |
| Balance at 31 March 2007 | 82 | 266 | 326 | 8,598 | 9,272 |
| Forfeited Share options | - | - | (326) | - | (326) |
| Share based payments | - | - | 54 | - | 54 |
| Foreign exchange translation adjustment | (26) | - | - | - | (26) |
| Balance at 31 March 2008 | 56 | 266 | 54 | 8,598 | 8,974 |
26. Borrowings
| 2008 | 2007 | |
| £000 | £000 | |
| Non-current | ||
| 6% Unsecured convertible loan stock | 3,108 | 3,013 |
| Promissory note - Scenewise Inc. | 121 | - |
| Finance lease liabilities | 46 | - |
| 3,275 | 3,013 | |
| Current | ||
| Promissory note - Scenewise Inc. | 165 | - |
| Finance lease liabilities | 105 | - |
| 270 | - | |
| Total borrowings | 3,545 | 3,013 |
On 27 September 2006 the Group issued £3,541,000 6% Unsecured convertible loan stock which is redeemable on 31 October 2011. 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 48.75p 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 £9.00 on or before the third anniversary or £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 Scenewise Inc. promissory note is repayable in equal quarterly instalments of £30,000 (2007: £nil) until completion of the loan repayments at 31 December 2009. The loan bears a fixed interest rate of 10%. The promissory note arose on the acquisition of Scope seven LLC.
Finance lease liabilities
Finance lease liabilities are payable as follows:
| Future minimum lease payments | Interest | Present value of minimum lease payments | |
| £000 | £000 | £000 | |
| Less than one year | 105 | - | 105 |
| Between one and five years | 46 | - | 46 |
| More than five years | - | - | - |
| 151 | - | 151 |
There were no assets held under finance leases during the year to 31 March 2007.
27. Trade and other payables
| 2008 | 2007 | |
| £000 | £000 | |
| Trade Creditors | 411 | 539 |
| Accrued expenses | 1,210 | 1,797 |
| 1,621 | 2,336 |
The fair values of trade and other payables equals their carrying amount.
28. Commitments
Capital commitments
The group had no capital commitments at the balance sheet date.
Operating lease commitments
The group has a number of operating leases as a lessee, for equipment and premises under non-cancellable agreements. The lease terms are between 3 and 6 years, and the majority of lease agreements are renewable at the end of the lease period at market rate. The lease expenditure charged to the income statement during the year is disclosed in note 9.The lease expenditure on premises is charged to the income statement on an average annual charge over the life of the lease.
The future minimum lease payments under non-cancellable operating leases are as follows:
| 2008 | 2007 | |
| £000 | £000 | |
| Within one year | 4 | 160 |
| From one to five years | 95 | - |
| After five years | 233 | - |
| 332 | 160 |
The group does not sub-lease any of its leased premises.
29. Business combinations
On 28 August 2007, the group acquired certain assets of Scope Seven Inc. and formed a new company, Scope Seven LLC. The group holds 100% of the share capital of Scope Seven LLC, a media production and design company operating in the US. The acquired business contributed revenues of £1,153,000 and a net loss of £889,000 to the group for the period 28 August 2007 to 31 March 2008.
Details of net assets acquired and goodwill are as follows:
| £000 | |
| Purchase consideration: | |
| Cash paid | 1,379 |
| Direct costs relating to the acquisition | 157 |
| Total purchase consideration | 1,536 |
| Fair value of net assets acquired | (694) |
| Goodwill (note 19) | 842 |
The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after the group's acquisition of Scope Seven LLC.
The assets and liabilities as of 28 August 2007 arising from the acquisition are as follows:
| Fair Value | Acquiree's carrying amount | |
| £000 | £000 | |
| Trade receivables | 40 | 40 |
| Property, plant and equipment | 477 | 477 |
| Intangible assets | 733 | 733 |
| Trade payables | (260) | (260) |
| Long-term debt | (296) | (296) |
| Net assets acquired | 694 | 694 |
| £000 | |
| Purchase consideration settled in cash | 1,536 |
| Cash and cash equivalents in subsidiary acquired | 0 |
| Cash outflow on acquisition | 1,536 |
There were no acquisitions in the year ended 31 March 2007.
30 Events after the balance sheet date
On 10 April 2008 the group announced that it had secured a material contract to deliver software automation products including its recently launched Media Adaptation Tool (MAT) to a major Hollywood studio. The contract has a fifteen year term, with five year break points and will provide a minimum income of $15 million over the fifteen years.
A separate announcement has been made today announcing that we have conditionally placed 3,413,333 new ordinary shares at a placing price of 15p per share to raise approximately £512,000.
31. Related parties
Key Management personnel
The details of key management remuneration is disclosed in the Directors' remuneration, interests and transactions (note 12).
No other related party transactions took place during the year.
32. Share based payments
Share options have been granted under the following schemes to subscribe for ordinary shares of the company. Movements in the number of options, under each of the schemes, and their related weighted average exercise price are as follows:
| 2008 | 2007 | |||
| Options | Weighted average exercise price | Options | Weighted average exercise price | |
| No. | £ | No. | £ | |
| Kazoo3D plc employee share option scheme* | ||||
| Outstanding at the beginning of the year | 2,008 | 37.50 | 2,008 | 37.50 |
| Surrendered during the year | (2,008) | 37.50 | - | - |
| Outstanding at the end of the year | - | - | 2,008 | 37.50 |
| Exercisable at the end of the year | - | - | 2,008 | 37.50 |
| Kazoo3D plc unapproved employee share option scheme* | ||||
| Outstanding at the beginning of the year | 4,425 | 16.77 | 4,425 | 16.77 |
| Surrendered during the year | (4,425) | 16.77 | - | - |
| Outstanding at the end of the year | - | - | 4,425 | 16.77 |
| Exercisable at the end of the year | - | - | 1,092 | 43.91 |
| Kazoo3D plc cross-over share option scheme* | ||||
| Outstanding at the beginning of the year | 13,880 | 37.50 | 13,880 | 37.50 |
| Surrendered during the year | (13,880) | 37.50 | - | - |
| Outstanding at the end of the year | - | - | 13,880 | 37.50 |
| Exercisable at the end of the year | - | - | 13,880 | 37.50 |
| ZOO Digital Group plc rollover share option scheme | ||||
| Outstanding at the beginning of the year | 40,701 | 0.01 | 40,701 | 0.01 |
| Surrendered during the year | (40,701) | 0.01 | - | - |
| Outstanding at the end of the year | - | - | 40,701 | 0.01 |
| Exercisable at the end of the year | - | - | 40,701 | 0.01 |
| ZOO Digital Group plc Enterprise Management Incentive scheme* | ||||
| Outstanding at the beginning of the year | 104,868 | 5.95 | 194,586 | 6.23 |
| Forfeited during the year | - | - | (89,718) | 6.55 |
| Surrendered during the year | (104,868) | 5.95 | - | - |
| Outstanding at the end of the year | - | - | 104,868 | 5.95 |
| Exercisable at the end of the year | - | - | 46,437 | 3.40 |
| ZOO Digital Group plc Unapproved share option scheme* | ||||
| Outstanding at the beginning of the year | 36,635 | 6.96 | 133,443 | 5.00 |
| Forfeited during the year | - | - | (96,808) | 4.26 |
| Surrendered during the year | (36,635) | 6.96 | - | - |
| Outstanding at the end of the year | - | - | 36,635 | 6.96 |
| Exercisable at the end of the year | - | - | 2,667 | 5.81 |
| ZOO Digital Group plc EMI scheme (2007)* | ||||
| Outstanding at the beginning of the year | - | - | - | - |
| Granted during the year | 422,979 | 0.27 | - | - |
| Outstanding at the end of the year | 422,979 | 0.27 | - | - |
| Exercisable at the end of the year | - | - | - | - |
| ZOO Digital Group plc Unapproved (2007)* | ||||
| Outstanding at the beginning of the year | - | - | - | - |
| Granted during the year | 1,842,437 | 0.27 | - | - |
| Outstanding at the end of the year | 1,842,437 | 0.27 | - | - |
| Exercisable at the end of the year | - | - | - | - |
*Under these schemes the percentage of shares that can be exercised is staggered over the exercise period with typically 40% exercisable within the first two years and a further 30% in each of the following two years.
Out of the 2,265,416 outstanding options (2007: 202,517 options), no options (2007: 106,785) were exercisable. No options were exercised in 2008 or 2007.
All share options outstanding at the end of the year have an expiry date of 30 August 2017 and an exercise price of £0.265.
In arriving at the fair value, each option grant has been valued separately using the binomial model and the resulting fair value is expensed over the vesting period. The following table lists the range of assumptions used in the model:
| Expected Volatility (%) | 74.4 - 100 |
| Risk-free Interest rate(%) | 4.05 - 5.25 |
| Expected life of option (years) | 5 |
| Expected dividends | none |
Volatility has been estimated by taking the historical volatility in the company's share price over a three year period. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Share based payments have had the following impact on the group's loss for the year:
| 2008 | 2007 | |
| £000 | £000 | |
| Total (credit)/expense recognised from share based payment transactions | (87) | 86 |
| Share based payment liability | 54 | 326 |
The credit for the year is due to the employees surrendering options during the year.
33. Financial instruments
The Group's financial instruments comprise cash and liquid resources, a long term convertible loan, a promissory note and various items, such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations.
It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken.
Market Risk
Foreign currency risk
The main risks arising from the Group's financial instruments are from foreign currency risk.
The Group had three overseas subsidiaries operating in the USA and France during the year. The majority of the group's overseas transactions are with the USA, hence exposing it to a currency risk of fluctuations in the US Dollar. At 31 March 2008, if Sterling had weakened/strengthened by 10% against the US Dollar with all other variables held constant, post tax loss for the year would have been £516,000 lower (2007:£143,000) or £423,000 greater (2007:£117,000), mainly as a result of translation of subsidiary undertakings. The increase from 2007 to 2008 is due to the acquisition of Scope Seven LLC, and all its assets and transactions in US Dollars.
Interest rate risk
In September 2006 the Group issued £3,541,000 Unsecured convertible redeemable loan stock, redeemable on 31 October 2011. The loan carries a fixed interest rate of 6%. The group also holds a promissory note repayable in quarterly instalments to Scenewise Inc. The promissory note will be fully repaid on 31 December 2009 and carries an interest rate of 10%. The group considers the interest rate risk on both loans to be minimal as both rates are fixed.
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. Management monitors rolling forecasts of the group's cash and cash equivalents on the basis of expected cash flows, reducing its liquidity risk through management of bank accounts, trade debtors and trade creditors and through controls on expenditure.
The table below analyses the group's financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cashflows.
| At 31 March 2008 | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | Over 5 years |
| £000 | £000 | £000 | £000 | |
| Borrowings | 270 | 155 | 3,120 | - |
| Trade and other payables | 1,621 | - | - | - |
| At 31 March 2007 | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | Over 5 years |
| £000 | £000 | £000 | £000 | |
| Borrowings | - | - | 3,013 | - |
| Trade and other payables | 2,336 | - | - | - |
Credit risk
Credit risk arises from cash and cash equivalents and credit exposures on outstanding receivables. The group's main credit risk is on the outstanding trade receivables, this risk is reduced through credit control procedures. An analysis of outstanding receivables is included in note 21.
34. Capital management
The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The group sets the amount of capital in proportion to risk. The group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the group may return capital to shareholders, issue new shares, or sell assets to reduce debt.
Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the consolidated balance sheet plus net debt.
| 2008 | 2007 | |
| £000 | £000 | |
| Total borrowings | 3,545 | 3,013 |
| Less cash and cash equivalents | (675) | (2,026) |
| Net Debt | 2,870 | 987 |
| Total equity | 1,634 | 993 |
| Total capital | 4,504 | 1,980 |
| Gearing ratio | 64% | 50% |
35. Transition to IFRS
This is the first year that the group has presented its consolidated financial statements under IFRS.
The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 March 2008, the comparative information presented in these financial statements for the year ended 31 March 2007 and in the preparation of the opening IFRS balance sheet at 1 April 2006.
In preparing its opening IFRS balance sheet, the group has adjusted amounts previously reported in financial statements prepared in accordance with UK GAAP. An explanation of how the transition from UK GAAP to IFRS has affected the group's financial position, financial performance and cash flows is set out in the following notes and tables.
35.1 Notes to reconciliation between UK GAAP and IFRS
IAS 18 - Revenue
Previously the Group recognised non refundable royalty advances when they became contracted and billable to the client. Under IAS 18 royalties need to be recognised on an accruals basis in accordance with the substance of the relevant agreement. Based on the substance of the contract agreements, revenue is recognised to match with estimated sales. Estimates of expected sales are reviewed at each balance sheet date. The following adjustments have been applied retrospectively resulting in a net increase in revenue of £457,000 in the year ended 31 March 2007.
IAS 38 - Intangible Assets
IAS 38 requires computer software, not integral to the operation of computers, to be reported under Intangible assets. Previously Computer software was reported under Computers within Tangible fixed assets. The adjustment has resulted in a straight reclassification of assets the changes being: £47,000 at 1 April 2006 and £21,000 at 31 March 2007.
IAS 19 - Employee Benefits
Under IAS 19 the Group is required to recognise in full the liabilities generated when the total of employees' cumulative paid holiday earned exceeds the total of cumulative paid holiday taken. Under UK GAAP the Group did not recognise this liability.
This change in accounting policy has been applied from the 1 April 2006 balance sheet. This has resulted in a charge for the year to 31 March 2007 of £26,000. This is due to the timing of the holiday year and the financial period ends.
IFRS 2 - Share based payments
For the year ending 31 March 2007 the Group adopted FRS20 the UK GAAP equivalent to IFRS 2, therefore no transitional adjustments are required in relation to Share based payments and the accounting policy remains as it was in the Annual report and accounts for the year ended 31 March 2007.
IFRS 3 - Business Combinations
IFRS 1 permits various optional exemptions. The Group has taken advantage of the exemption of applying IFRS 3 Business combinations, retrospectively to business combinations that took place prior to the transitional date. The investments held on the balance sheet at the transitional date remain at their previous UK GAAP carrying value at the date of transition.
IFRS 3 - Goodwill
Previously, the goodwill arising on acquisition was amortised over a 10 year period. Goodwill is now reviewed annually for impairment.
IAS 21 - The effects of changes in foreign exchange rates
The Group has taken advantage of the exemption in IFRS 1, which allows the cumulative translation differences to be set to zero at the date of transition for all subsidiaries. The Group has therefore not identified cumulative translation differences prior to the date of transition.
For translation difference occurring after the transition date, these are reported as a separate element within equity.
Cash flow statement
Although there is no effect on the underlying cash generation and expenditures of the group, there have been some presentational changes on the transition from UK GAAP to IFRS. The cash flow statement under IFRS shows the movement in cash and cash equivalents. The format of the cash flow statement has changed to show cash flows analysed between operating, investing and financial activities.
35.2 Reconciliation of equity
| Software | ||||||||||||||||||||
| UK | Intangible | Employee | Revenue | |||||||||||||||||
| GAAP | Assets | Goodwill | Benefits | Recognition | IFRS | |||||||||||||||
| IAS 38 | IFRS3 | IAS 19 | IAS 18 | |||||||||||||||||
| As at 31 Mar 2006 | £000 | £000 | £000 | £000 | £000 | £000 | ||||||||||||||
| ASSETS | ||||||||||||||||||||
| Non-current assets | ||||||||||||||||||||
| Goodwill | 1,595 | 1,595 | ||||||||||||||||||
| Other Intangible assets | 412 | 47 | 459 | |||||||||||||||||
| Property, plant and equipment | 342 | (47) | 295 | |||||||||||||||||
| 2,349 | - | - | - | - | 2349 | |||||||||||||||
| Current assets | ||||||||||||||||||||
| Inventories | 48 | 48 | ||||||||||||||||||
| Trade receivables and other receivables | 2,499 | 2,499 | ||||||||||||||||||
| 2,547 | - | - | - | - | 2,547 | |||||||||||||||
| Total assets | 4,896 | - | - | - | - | 4,896 | ||||||||||||||
| LIABILITIES | ||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||
| Trade payables and other payables | (2,646) | (48) | (868) | (3,562) | ||||||||||||||||
| Short-term borrowings and overdraft | (317) | (317) | ||||||||||||||||||
| (2,963) | - | - | (48) | (868) | (3,879) | |||||||||||||||
| Non-current liabilities | ||||||||||||||||||||
| Borrowings | - | - | ||||||||||||||||||
| - | - | - | - | - | - | |||||||||||||||
| Total Liabilities | (2,963) | - | - | (48) | (868) | (3,879) | ||||||||||||||
| Net Assets | 1,933 | - | - | (48) | (868) | 1,017 | ||||||||||||||
| EQUITY | ||||||||||||||||||||
| Equity attributable to equity | ||||||||||||||||||||
| holders of the parent | ||||||||||||||||||||
| Share capital | 635 | 635 | ||||||||||||||||||
| Share premium account | 21,648 | 21,648 | ||||||||||||||||||
| Other reserves | 8,598 | 8,598 | ||||||||||||||||||
| Share option reserve | 418 | 418 | ||||||||||||||||||
| Retained earnings | (29,277) | (48) | (868) | (30,193) | ||||||||||||||||
| 2,022 | - | - | (48) | (868) | 1,106 | |||||||||||||||
| Interest in own shares | (89) | (89) | ||||||||||||||||||
| Attributable to equity holders | 1,933 | - | - | (48) | (868) | 1,017 | ||||||||||||||
35.2 Reconciliation of equity
| Software | |||||||||||||||
| UK | Intangible | Employee | Revenue | ||||||||||||
| GAAP | Assets | Goodwill | Benefits | Recognition | IFRS | ||||||||||
| IAS 38 | IFRS3 | IAS 19 | IAS 18 | ||||||||||||
| As at 31 Mar 2007 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||
| ASSETS | |||||||||||||||
| Non-current assets | |||||||||||||||
| Goodwill | 1,259 | 336 | 1,595 | ||||||||||||
| Other Intangible assets | 734 | 21 | 755 | ||||||||||||
| Property, plant and equipment | 170 | (21) | 149 | ||||||||||||
| 2,163 | - | 336 | - | - | 2,499 | ||||||||||
| Current assets | |||||||||||||||
| Trade payables and other payables | 1,817 | 1,817 | |||||||||||||
| Cash and cash equivalents | 2,026 | 2,026 | |||||||||||||
| 3,843 | - | - | - | - | 3,843 | ||||||||||
| Total assets | 6,006 | - | 336 | - | - | 6,342 | |||||||||
| LIABILITIES | |||||||||||||||
| Current Liabilities | |||||||||||||||
| Trade payables and other payables | (1,903) | (22) | (411) | (2,336) | |||||||||||
| (1,903) | - | - | (22) | (411) | (2,336) | ||||||||||
| Non-current liabilities | |||||||||||||||
| Borrowings | (3,013) | (3,013) | |||||||||||||
| (3,013) | - | - | - | - | (3,013) | ||||||||||
| Total Liabilities | (4,916) | - | - | (22) | (411) | (5,349) | |||||||||
| Net Assets | 1,090 | - | 336 | (22) | (411) | 993 | |||||||||
| EQUITY | |||||||||||||||
| Equity attributable to equity | |||||||||||||||
| holders of the parent | |||||||||||||||
| Share capital | 887 | 887 | |||||||||||||
| Share premium account | 22,102 | 22,102 | |||||||||||||
| Other reserves | 8,598 | 8,598 | |||||||||||||
| Share option reserve | 326 | 326 | |||||||||||||
| Convertible loan note reserve | 266 | 266 | |||||||||||||
| Foreign exchange translation | 82 | 82 | |||||||||||||
| Retained earnings | (31,095) | 336 | (22) | (411) | (31,192) | ||||||||||
| 1,166 | - | 336 | (22) | (411) | 1,069 | ||||||||||
| Interest in own shares | (76) | (76) | |||||||||||||
| Attributable to equity holders | 1,090 | - | 336 | (22) | (411) | 993 | |||||||||
35.3 Reconcilation of profit for the year ended 31 March 2007
| Software | ||||||
| UK | Intangible | Employee | Revenue | |||
| GAAP | Assets | Goodwill | Benefits | Recognition | IFRS | |
| IAS 38 | IFRS3 | IAS 19 | IAS 18 | |||
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Revenue | 3,749 | - | - | - | 457 | 4,206 |
| Cost of Sales | (1,404) | (1,404) | ||||
| Gross profit | 2,345 | - | - | - | 457 | 2,802 |
| Other operating income | 117 | 117 | ||||
| Other operating expenses | (3,883) | 26 | (3,857) | |||
| Restructuring costs | (94) | (94) | ||||
| Depreciation | (144) | 17 | (127) | |||
| Amortisation of intangible assets | (402) | (17) | 336 | (83) | ||
| Exceptional items | 310 | 310 | ||||
| Total operating expenses | (4,213) | - | 336 | 26 | - | (3,851) |
| Operating loss | (1,751) | - | 336 | 26 | 457 | (932) |
| Finance income | 53 | 53 | ||||
| Finance costs | (185) | (185) | ||||
| Loss before taxation | (1,883) | 336 | 26 | 457 | (1,064) | |
| Taxation | - | - | ||||
| Loss for the year | (1,883) | - | 336 | 26 | 457 | (1,064) |
| Continuing operations | (1,792) | 336 | 26 | 92 | (1,338) | |
| Discontinued operations | (91) | 365 | 274 | |||
| Loss for the year | (1,883) | - | 336 | 26 | 457 | (1,064) |
Annual report and Accounts
The Report & Accounts for the year ended 31 March 2008 will be posted to shareholders on or around 9 September 2008. Further copies will be available from the Company's Registered Office:
The Tower
2 Furnival Square
Sheffield
S1 4QL
Copies will also available on the Group's website www.zoodigitalgroup.com.
Annual General Meeting
The annual general meeting of the Group will be held at the Group's offices, The Tower, 2 Furnival Square, Sheffield, S1 4QL on 6 October 2008 at 11.00 a.m.