Zoo Digital Regulatory News (ZOO)

22 Dec 2006 07:01

Zoo Digital Group PLC22 December 2006 ZOO DIGITAL GROUP PLC ("ZOO" or "the Group") INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2006 ZOO Digital Group plc, the DVD and video technology company, ("ZOO" or "the Group") today announces its results for the six months ended 30 September 2006. Financial Highlights • Group loss before interest, tax, depreciation and amortisation reduced to £1.1 million (six months to 30 September 2005: Loss of £2.2 million) • Group turnover of £2.1 million following the restructure of the Group (six months to 30 September 2005: £4.4 million) • Turnover of the continuing business, ZOOtech, increased by 67% to £736,000 (six months to 30 September 2005: £440,000) • ZOOtech's loss before interest, tax, depreciation and amortisation reduced by 67% to £396,000 (six months to 30 September 2005: loss of £1.2 million) • Successful fundraising of £3.9 million (net of expenses) through a placing of new ordinary shares and issue of convertible loan notes Operational Highlights • The Group strategy has been restructured and is now focussed on its higher margin video technology business; both ZOO's games publishing division and interactive DVD development operation have been closed and their assets sold in two separate transactions • A contract has been signed with a major Hollywood studio for the use of the Group's new and unique Templated Authoring System which automates production of video titles on DVD and other formats • The renewal for a second year of a 'Menu Regionalisation' contract with a major Hollywood studio • Continued growth in the adoption of the Group's DVD-EXTRA STUDIO product in businesses across the UK, Europe and USA. This product is now used by over 100 customers and products released across the education, entertainment and corporate markets • New editions of 'Who Wants to be a Millionaire?' and 'Telly Addicts', together with a range of new UK interactive DVD products including 'Test the Nation', 'Time Tunnel', 'Smash Hits' and 'Stardancer' developed for and published by Universal Pictures Video. 'Question of Sport' interactive DVD title developed for 2 Entertain Video • 15 patents granted with a further 53 patents pending Commenting on the results, Stuart Green, CEO of ZOO Digital Group plc, said: "During the first six months of this year the Group has been restructured andrefocused around its video technology development and licensing operations, andits finances underpinned by a successful fundraising that has provided theworking capital to develop the business. "We are expecting to release shortly our latest professional software product -the Templated Authoring System - for which we have already secured our firstlicensing deal with a major Hollywood studio. It is the latest addition to asuite of products, with our Regionalisation Tool and DVD-EXTRA STUDIO software,that delivers significant benefits for the video title production industry. Weexpect these to generate a growing revenue stream. "We are very excited by the new opportunities available to the Group and lookforward to a year of growth in 2007." Enquiries Stuart Green Chris Lynch/ Helen Thomas/Charlie HooperCEO, ZOO Digital Group plc Weber Shandwick0114 241 3700 020 7067 0700 Alasdair RobinsonNoble & Company Limited0131 225 9677 Notes to Editors ZOO Digital Group ("ZOO") is an innovative software solutions company that helpsvideo publishers and rights owners maximise revenues and profits by exploitingtheir content across multiple platforms, languages and territories. ZOO has aportfolio of 60 patents (granted or pending) and a depth of knowledge in digitalmedia processes which has few rivals. ZOO's key products include: Interactive DVD software - world leading tool for creating interactive DVDs.Most of the computer games played on any household DVD player are made withZOO's software. Notable titles include "Who Wants to be a Millionaire?", "Question of Sport" and "Madagasgar - Animal Trivia Game". Linear DVD production software - technology to automate the production of linear(movies & TV shows) digital media. With this automation comes a significantreduction in time-to-value for the intellectual property, as well as radicallychanging the economies of publishing back catalogues. Multi-language production software - technology to 'localise' text that appearsin digital media. This software revolutionises the localisation process forvideo publishers. Previously, highly-skilled technicians were required tomanipulate graphical data. Now, with ZOO's software, text that needs translationis extracted and replaced with corresponding translations - reducing time,errors and labour costs. CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT Introduction The first half of this year has represented a step change in ZOO's development.A strategic review announced in February 2006 prompted the Board to focus Groupactivities on the continuing development of its unique video technology and exitits games publishing and development activities. During the first half of the year the core ZOOtech division secured the firstcontract for its new unique Templated Authoring System. This system enables theautomated production of video titles. The customer is a major Hollywood studio,which has also renewed its licence for the use of ZOOtech's Menu RegionalisationTool for a further year. Detailed discussions are ongoing with other largeentertainment companies and management is focused on securing new customers forthese tools. The interactive DVD games ("iDVD") market has grown significantly in 2006 withover 100 new iDVD titles being released to the UK market this season, up fromaround 30 last year. Over half have been developed using ZOOtech's DVD-EXTRASTUDIO system. Financial Review As a result of the closure of the Group's publishing and development activities,Group turnover decreased to £2.1 million for the six months to 30 September 2006(six months to 30 September 2005: £4.4 million). The loss before interest, tax,depreciation and amortisation was reduced by 50% to £1.1 million (six months to30 September 2005: loss of £2.2 million). The continuing business, ZOOtech, increased its turnover by 67% to £736,000 (sixmonths to 30 September 2005: £440,000) and reduced its loss before interest,tax, depreciation and amortisation by 67% to £396,000 (six months to 30September 2005: loss of £1.2 million). Historically, the Group's revenue stream has been weighted towards the secondhalf of the year, the Christmas season is a major part of the selling season forPC games and iDVD's. In the current year ZOO's revenues continue to have astrong seasonal component due to its royalty income stream on sell-through ofconsumer iDVD titles. However, in future years, the Group expects the revenueprofile to become progressively more even as the less seasonal revenue streamsfrom Regionalisation and Templated Authoring become better established. The prospects for the second half of the financial year are encouraging with abase of continuing revenues from the Regionalisation Tool and the TemplatedAuthoring System. Revenue from DVD-EXTRA STUDIO is dependent on the level ofsell-through of the numerous consumer iDVD titles produced using the tool,particularly over the Christmas period. ZOOtech Ltd ZOOtech, the technology division of the Group, and now its sole business,continues to focus its activities on licensing its innovative proprietarysoftware. The Board believes these products can establish dominant positions inthe video production industry. ZOOtech's current products deliver substantialtime and cost savings for DVD title producers, in some cases enabling customersto access incremental revenue streams. Its market focus over the period hascontinued in two areas: Home Video Market This market consists of those companies involved in the production andpublishing of home video titles, currently on DVD-Video, with a range of newplatforms, such as HD DVD, Blu-ray and video on demand, growing in popularity. The Home Video Market is in a state of transition, with publishers facingincreasing pressures due to factors such as declining margins, the effects ofpiracy, shortening release windows and the emergence of new platforms. ZOOaddresses this market with the Regionalisation Tool for the efficient productionof localised DVD menus, and the Templated Authoring System for the automatedproduction of video titles. Using ZOOtech's unique production tools, customerscan generate additional revenue streams by publishing DVD titles in previouslyuneconomic territories. Interactive DVD ZOOtech licenses its DVD-EXTRA STUDIO product to companies involved in theproduction and publishing of iDVD titles. The number of companies involved in the development and commercialisation ofiDVD titles has increased significantly this year, in line with a far highernumber of consumer products released into the Christmas 2006 market. The UKremains ahead of other territories, and publishers of iDVD titles created usingZOO's technology this year include Universal Pictures Video, 2 Entertain Video,ITV DVD, EMI, Warner Vision International, Lace International, Dreamworks HomeEntertainment, Sony BMG, Scholastic Media, Circle Studios, Britannia Games,Fremantle Media, Pinnacle Vision, and TWI. Including products released in previous years that are still being sold atretail, the number of iDVD titles in the UK market is around 150, of which morethan half are created using ZOO's technology. New titles developed by the Company's licensees for the season include 'NowThat's What I Call a Music Quiz', 'Blockbusters', 'Catchphrase', 'Top Trumps', 'The Price is Right', 'Blankety Blank', 'Play Your Cards Right' and 'Sale of theCentury'. In the first half of the year ZOO Interactive Video developed aselection of iDVD games including 'Who Wants to be a Millionaire?', 'TellyAddicts', 'Question of Sport', 'Test the Nation', 'Time Tunnel', 'Smash Hits'and 'Stardancer'. ZOO Interactive Video Limited ("ZIV") ZIV's activities have led to the creation of a new game genre - the interactiveDVD and DVD Game. In the UK, retailers such as HMV, Virgin, WHSmith and Bordersare displaying iDVD titles prominently with dedicated display sections and, insome cases, an iDVD chart. The Official UK Charts Company - the market researchcompany that compiles UK chart information for music and DVD - has this year forthe first time produced a chart of iDVD products. These developments reflectthe growing popularity of this new home entertainment genre. ZIV has pioneeredthis development and completed eight titles during the period, up from four lastyear, which are being published by Universal Pictures Video and 2 EntertainVideo, all supported by television advertising campaigns. ZOOtech now has over 100 development and publishing licensees of its technologywho are active in producing and releasing iDVD titles across a number ofterritories. Consequently it is no longer appropriate for ZOO to produceconsumer titles in-house and the Board decided to dispose of this activity. InOctober ZOO announced that Andy Scrivener, Chief Operating Officer, would beleaving the Group to establish his own DVD games development business. Andy'scompany is a new DVD-EXTRA STUDIO licensee, and his first title - 'TerryVenables Football Quiz' - has been published by Universal Pictures Video. ZOOhas retained the benefit of all iDVD titles developed prior to disposal. In a separate transaction we announced in April 2006 that the assets of ZOO'straditional games publishing business had been sold. Following these disposals,the Group consists solely of ZOOtech. Board Changes The final part of our reorganisation involved a restructuring of the Board.John Barnes stepped down as Non-Executive Chairman of the Group to be replacedby Dr. Christopher Honeyborne (previously a Non-Executive Director of theGroup). Helen Gilder was appointed Group Finance Director and Company Secretaryreplacing Robert Deri who previously held these positions. Helen qualified as aChartered Accountant with PKF in September 1991 and has worked as GroupFinancial Controller for the Company since 2000. Robert remains on the Board asExecutive Director, responsible for corporate strategy. Matt Taylor was appointed as a Non-Executive Director of the Company. Matt is apartner in Foresight Venture Partners and a Non-Executive Director of severalAIM-quoted and private companies. Funds managed by Foresight Venture Partnersinvested a total of £2 million in the Group's recently announced fundraising. Outlook After a period of restructuring, ZOO has established a sound platform forgrowth. The Board is currently considering strategic options to maximise thisgrowth. Trading in the short term is heavily reliant on iDVD sales over theChristmas period, but recurring revenue streams are increasing, providinggreater predictability for future years. ZOO's success hinges on the talent of its employees and managers responsible forthe creation and exploitation of its world class intellectual properties. TheDirectors would like to extend their thanks and appreciation to all staff fortheir contribution and commitment. C B M HoneyborneChairman S A GreenChief Executive Officer 22 December 2006 CONSOLIDATED UNAUDITED PROFIT AND LOSS ACCOUNTFor the six months ended 30 September 2006 6 months to 6 months to 30 Year to 31 30 September September 2005 March 2006 2006 Unaudited Unaudited Audited Restated* Restated* £'000 £'000 £'000Turnover Continuing operations 736 440 1,696 Discontinued operations 1,328 3,955 7,468 2,064 4,395 9,164 Cost of sales (1,113) (2,911) (6,183) Gross profit 951 1,484 2,981 Other operating expenses (2,038) (3,679) (6,739) Loss before interest, tax, depreciation and amortisation (1,087) (2,195) (3,758) Depreciation (82) (82) (173)Amortisation of intangible fixed assets (214) (241) (682) Operating loss (1,383) (2,518) (4,613) Continuing operations (646) (1,443) (1,948) Discontinued operations (737) (1,075) (2,665) (1,383) (2,518) (4,613) Loss on disposal of discontinued operation - - (3,698)Other interest receivable and similar income -4 11 25Amounts written off investment - - (240) Interest payable and similar charges (27) (50) (109) Loss on ordinary activities before taxation (1,407) (2,557) (8,635) Tax on loss on ordinary activities - - - Retained loss for the financial year (1,407) (2,557) (8,635) * Restated following the adoption of FRS20 CONSOLIDATED UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the six months ended 30 September 2006 6 months to 30 6 months to 30 Year to 31 September 2006 September 2005 March 2006 Unaudited Unaudited Audited Restated* Restated* £'000 £'000 £'000 Loss for the financial period (1,407) (2,557) (8,635)Total gains and losses relating to the year (1,407) (2,557) (8,635)Prior year adjustment (632) - -Total recognised gains and losses relating to the period (2,039) (2,557) (8,635) CONSOLIDATED UNAUDITED BALANCE SHEETAs at 30 September 2006 As at 30 As at 30 As at 1 September 2006 September March 2006 2005 Unaudited Unaudited Audited Restated* Restated* £'000 £'000 £'000Fixed Assets Intangible 1,818 3,127 2,007 Tangible 262 405 342 2,080 3,532 2,349Current Assets Stock - 1,005 48 Debtors 2,706 6,284 2,499 Cash 2,444 - - 5,150 7,289 2,547Current Liabilities Creditors (2,762) (3,263) (2,962) Net current assets 2,388 4,026 (415) Long term liabilities (3,258) - - 1,210 7,558 1,934Equity Called up share capital 887 635 635 Share premium 21,818 21,648 21,648 Convertible loan 283 - - Equity share options 610 417 632 Other reserves 8,598 8,598 8,598 Profit and loss account (30,897) (23,411) (29,490) Interest in own shares (89) (329) (89) 1,210 7,558 1,934 CONSOLIDATED UNAUDITED CASH FLOW STATEMENTFor the six months ended 30 September 2006 6 months to 6 months to Year to 31 30 September 30 September March 2006 2006 2005 Unaudited Unaudited Audited Restated* Restated* £'000 £'000 £'000 Net cash outflow from operating activities (1,150) (3,229) (2,004) Exceptional items - - (35) Returns on investment and servicing of finance (23) (39) (84) Capital expenditure and financial investment (27) (127) (470) Net cash outflow before financing (1,200) (3,395) (2,593) Financing 3,963 3,005 3,005 Increase / (decrease) in cash in the period 2,763 (390) 412 Reconciliation of operating loss to net cash flow from operating activities Operating loss (1,383) (2,518) (4,613) Depreciation charge 82 82 173 Goodwill amortisation 214 241 281 Decrease / (Increase) in stock 48 (102) 1,359 (Increase) / Decrease in debtors (207) (347) (272) Increase / (Decrease) in creditors 116 (756) 682 Share based payments (22) 171 386 Net cash outflow from operating activities (1,152) (3,229) (2,004) Financing Ordinary share capital 820 3,171 3,171 Convertible loan notes 3,541 - - Costs of fundraising (398) (166) (166) 3,963 3,005 3,005 Analysis of changes in cash and cash equivalents Increase / (decrease) in cash in the period 2,761 (390) 412 Cash inflow from convertible loan (3,258) - - Net debt at start of period (317) (729) (729) Net debt at end of period (814) (1,119) (317) Analysed as follows Cash at bank and in hand 2,444 - - Bank overdraft - (1,119) (317) Convertible loan notes (3,258) - - (814) (1,119) (317) NOTES Board Approval The interim accounts were approved by the board of directors on 21st December2006. Nature of Accounts The financial information for the six months ended 30 September 2006 and 30September 2005 is unaudited and does not constitute statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. The information has beenprepared on the basis of accounting policies used in the financial statements to31 March 2006 with the exception of FRS20 which has been adopted for the firsttime in the period ended 30 September 2006. Comparative periods have beenrestated. The financial information for the period ended 31 March 2006 is extracted fromthe audited accounts for that period. The auditors' report on those accountswas unqualified and did not contain a statement under Section 237(2) or (3) ofthe Companies Act 1985. Earnings Per Share Earnings per share is calculated based upon the loss on ordinary activitiesafter tax for each period divided by the weighted average number of shares inissue during each period being 317,660,076 (September 2005: 300,599,003; March2006: 308,920,444). On 24 October 2006 the shares were consolidated in the ratio 75:1. The totalnumber of shares in issue after this consolidation is 5,913,088. Information on fully diluted earnings per share has not been presented as thecompany recorded a loss after tax in each of the relevant periods andaccordingly the exercise of options would not result in further earningsdilution for shareholders. FRS20 In line with the requirements of UK standard accounting practice, FRS20 'ShareBased Payments' has been adopted for the first time in the half year to 30September 2006. FRS20 requires the Group to expense share options granted toemployees and directors. Charges are calculated using the binomial method andare recognised on a straight line basis and assessed on estimated performanceover the period in which the share options vest. The effect on the result forthe period was a credit of £22,000 (six months to 30 September 2005: charge£171,000; year to March 2006: charge £386,000). Its adoption has no net effecton the Group's retained reserves and cash flow. Further Copies Copies of this announcement and the Interim Report for the six months ended 30September 2006 will be available, free of charge, for a period of one month fromthe Company's Nominated Adviser and Broker, Noble & Company Limited, 120 OldBroad Street, London, EC2N 1AR, Tel: 020 7763 2200 or from the registered officeof the Company at 20 Furnival Street, Sheffield, S1 4QT. This information is provided by RNS The company news service from the London Stock Exchange