Zoo Digital Regulatory News (ZOO)

24 November 2010

ZOO DIGITAL GROUP PLC

("ZOO" or "the Group")

INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2010

ZOO Digital Group plc, the provider of software and software-led services for the filmed entertainment market, today announces its financial results for the six months to 30 September 2010.

Financial Highlights

·; Revenue in line with first half of prior year at $8.1 million (H1 2009: $8.1 million)

·; Operating profit up 36% to $880,000 (H1 2009: $647,000) reflecting focus on higher margin work

·; Maiden interim profit before tax of $388,000 (H1 2009: loss of $232,000)

·; Basic earnings per share of 1.72 cents (H1 2009: loss of 1.09 cents)

·; Cash balance at 30 September of $1.9 million (30 September 2009: $450,000)

Operational Highlights

·; New iTunes® production toolset introduces ZOO to the video Electronic Sell Through (EST) market

·; Advanced talks with new prospective clients resulting from Multi Packaging Solutions (MPS) collaboration

·; Initial engagement with an illustrated book publisher for e-book production

Stuart Green, CEO of ZOO Digital, commented:

"I am pleased to be able to report that ZOO has traded profitably in the first half of the year, driven by recurring revenues from major clients.

We continue to add new products to our suite of tools which help our customers achieve cost savings and protect their brand integrity, and I am particularly pleased with the progress we have made in helping our customers exploit Apple's iTunes system for the distribution of video. As well as looking to add further Hollywood studios to our client base, we have qualified, through our relationship with MPS, other vertical markets where our software is highly relevant. This will provide valuable diversification of our sources of income, and we therefore continue to view the future with confidence."

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Chairman and Chief Executive's Statement

We are pleased to report on another successful period for ZOO for the six months ended 30 September 2010.

Revenues for the period were similar to those reported for the same period last year at $8.1 million (H1 2009: $8.1 million), and in line with expectations. However, operating margins have improved due to greater focus on our core higher margin areas of software licensing and value added services. This has resulted in an operating profit up 36% to $880,000 (H1 2009: $647,000) and our maiden interim profit before tax of $388,000 (H1 2009: loss before tax of $232,000).

Whilst our short term growth depends on our existing market of major Hollywood studios, during the course of the year we have started to explore the applicability of our software tools to a much wider audience and to deliver a greater range of services. Our ability to enable centralisation of certain printing and marketing functions means that ZOO's products are well suited to any company that markets products in multiple countries and particularly to those companies for which the quality, integrity and recognition of their brands are paramount. The fact that we can also provide significant savings in terms of both costs and time to market makes our offering even more compelling.

During the period we have demonstrated the applicability of our solutions in other vertical markets by securing initial engagements with new customers, including one in the area of illustrated book publishing. Our Media Adaptation Tool (MAT) and Translation Management System (TMS) are being used to conform publications to corporate branding requirements, and also to provide for efficient print localisation and conversion for U.S. and international e-book publishing.

Our relationship with Multi Packaging Solutions Inc ("MPS") has continued to highlight some exciting opportunities and we hope to be able to announce our first joint customer project in the near future. The discussions that we have had with prospective clients to date have endorsed our belief that our software tools offer significant benefits to companies from a number of different industries. They have also confirmed our view that the tools will need only modest adaptation for these different fields and that they can be deployed without significant increase in cost to ZOO.

Within our traditional audiences the Company continues to embed itself within its customers' operations and continually looks for additional tools to meet our customers' requirements. In July we announced that our new automated styleguide system had gone live with its first adoption by Warner Home Video International. The adoption of any system with a major new client is naturally a thorough and prolonged process but we are pleased with the progress being made.

We have also recently introduced our new iTunes® production toolset, introducing ZOO to the Electronic Sell Through (EST) market for video, and we are delighted that this has been adopted by a major film studio. The first titles created with our toolset became available in the iTunes store during November. The EST market is proving increasingly popular as a sales platform and our technology enables studios to adapt existing materials created for release in other formats, such as DVD and Blu-ray, so that they can be purchased via EST. Our production tools provide a highly cost effective way of bringing additional features to iTunes and we believe that there is scope for further work, besides movie extras, that we can support for this very widely used platform.

Finance Review

The revenue, at $8.1m, is in line with that reported for the same period last year but the gross profit has increased to $6.1m (H1 2009: $5.7m) with gross profit margin increasing by more than 5% from H1 2009 to 76.2%. Last year saw an increase in work which is subcontracted to a third party supplier whereas this year the proportion of sales relating to this type of work has been reduced and replaced with sales of our core products and services which earn higher margins.

The overheads in the business have changed little since the comparable period with a total of $5.3m compared to $5.2m in the previous period.

The operating profit of $880,000 shows an improvement of 36% over the same period last year and the retained profit shows considerable improvement over the prior period with a profit of $388,000 compared to a loss of $233,000 in the prior period.

The group continues to have significant tax losses to be used in both the UK and the US which we anticipate will protect future profits from tax charges for the foreseeable future.

The group is reporting an improvement in cash generated from operating activities at $774,000 (H1 2009: $669,000) and a cash balance at 30 September of $1.9m (Balance at 30 September 2009: $450,000). The equity investment by MPS in July has protected the cash position of the business and we continue to have access to an on demand overdraft facility of UK£500,000 (equivalent to $790,000 at the exchange rate on 30 September 2010), currently unused. The Group has no debt other than a convertible loan note of UK£3.5m, and the overdraft facility helps to provide a working capital buffer to fund the growth of the business.

Board Changes

Ian Stewart, Non-Executive Director of the Company, has announced his decision to step down from the Board of Directors with effect from 31 December 2010 to concentrate on his other business interests. We are pleased that Ian will be working with us for the following 12 months as a consultant to help us to find and exploit new opportunities for our products. The Board would like to thank Ian, who has been with ZOO Digital since inception, for his dedication and commitment to the Company, and he takes with him our very best wishes for the future.

Outlook

We continue to add innovative new products and explore further opportunities to embed ourselves deeper within our clients' operations, thereby creating even greater value for them and for ZOO. Over the course of the last few months we have identified several new areas where we believe that our technology can be applied to help customers in the same way that we have helped major Hollywood studios cut their costs and protect their brand integrity around the world. This will not only increase the overall size of our target market but also diversify our revenue streams so that we become less dependent on any individual customers or area of business.

As with many new, disruptive technologies there is often a long lead time between signing new customers and seeing a significant revenue contribution from them, as the customer needs time to modify established processes and become accustomed to new ways of working. However, the long term rewards for ZOO resulting from such deep involvement at the heart of our customers' businesses can be substantial. Our track record of success with Hollywood studios and a very healthy sales pipeline for our existing and new products from both current and potential clients, give the Board of ZOO confidence in the future success of the Company.

Roger D Jeynes Dr Stuart A Green

Chairman Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

for the six months ended 30 September 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

as at 30 September 2010

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

for the six months ended 30 September 2010

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

for the six months ended 30 September 2010

NOTES

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.

This condensed consolidated financial information is presented in US dollars, the currency of the primary economic environment in which the company operates.

The interim accounts were approved by the board of directors on 23 November 2010.

This consolidated interim financial information has been reviewed, not audited.

Basis of preparation

The consolidated financial statements of ZOO Digital Group plc and its subsidiary undertakings (the "Group") for the period ended 31 March 2011 will be prepared in accordance with those International Financial Reporting Standards ("IFRS"), as adopted by the European Union.

This Interim Report has been prepared in accordance with UK AIM listing rules which require it to be presented and prepared in a form consistent with that which will be adopted in the annual accounts having regard to the accounting standards applicable to such accounts. It has not been prepared in accordance with IAS 34 "Interim Financial Reporting".

The policies applied are consistent with those set out in the annual report for the year ended 31 March 2010, and have been consistently applied, unless stated otherwise.

A copy of the statutory accounts for the year ended 31 March 2010, prepared under IFRS, has been delivered to the Registrar of companies and contained an unqualified auditors' report.

Basis of Consolidation

The consolidated financial statements of ZOO Digital Group plc include the results of the Company and its subsidiaries. Subsidiary accounting policies are amended where necessary to ensure consistency within the Group and intra group transactions are eliminated on consolidation.

Foreign currency translation

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 is US Dollars which is the company's functional and presentation currency.

Transactions and balances

Transactions in foreign currencies are recorded at the prevailing rate of exchange in the month of the transaction. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the yearend exchange rates are recognised in the income statement.

Group companies

The results and financial positions of all group entities that use a functional currency different from the presentation currency are translated into the presentation currency as follows:

·; assets and liabilities for each entity are translated at the closing rate at the balance sheet date;

·; income and expenses for each income statement are translated at the prevailing monthly exchange rate for the month in which the income or expense arose and all resulting exchange rate differences are recognised with foreign exchange translation reserve.

Equity securities issued

Earnings per share

Earnings per share is calculated based upon the profit or loss on ordinary activities after tax for each period divided by the weighted average number of shares in issue during the period.

Further Copies

Copies of this announcement and the Interim Report for the six months ended 30 September 2010 will be available, free of charge, for a period of one month from the Company's Nominated Adviser and Broker, FinnCap, 60 New Broad Street, London, EC2M 1JJ, from the registered office of the Company at The Tower, 2 Furnival Square, Sheffield, S1 4QL or from the Group's website: www.zoodigital.com.