Zoo Digital Regulatory News (ZOO)

9 December 2014

ZOO DIGITAL GROUP PLC

("ZOO", "the Group" or "the Company")

Interim Results

ZOO Digital Group plc, the provider of cloud-based media production software and services to global creative organisations, today announces its financial results for the six months ended 30 September 2014.

HIGHLIGHTS

Operational highlights

· Continued diversification of client base and revenue mix

· Strong demand for ZOOsubs, the Group's subtitling software and services, with new customers added every month

· Ongoing investment in ZOOsubs and ZOOcore in line with market opportunity

Key Financials

· Revenues up 47% to $6.9m (H1 2013: $4.7m)

· Adjusted EBITDA increased 38% to $0.4m (H1 2013: $0.3m)*

· Post period end new convertible loan note secured raising $1.3m (£0.8m) in working capital support

 * Adjusted EBITDA is stated before exchange differences and share based payments

Stuart Green, CEO of ZOO Digital, commented,"The Board is very pleased with the progress achieved in the period. The positive momentum from the prior year has continued into the first half, resulting in top line revenue growth of over 40%.

"We remain encouraged by the increasing demand we are receiving for our cloud-based solutions, and our ZOOsubs offering in particular is attracting considerable interest. While we continue to monitor closely the changing dynamics within the entertainment industry, the growing base of repeatable revenues combined with a pipeline of new clients and projects, with a balance sheet strengthened after the period end, gives the Board good grounds for optimism in the future prospects of the business."

Ends

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About ZOO Digital Group plc:

ZOO Digital is a provider of cloud-based media production services and software to global creative organisations, predominantly in the entertainment industry. ZOO's full service proposition includes localisation of audio-visual content (embracing subtitling, captioning and dubbing), creative workflow systems and digital distribution solutions.

ZOO's services enable clients to capitalise on new routes to market and deliver localised content to their customers across multiple platforms.

ZOO's clients enjoy reduced time to market, higher quality and lower costs. This is achieved by delivering differentiated production services through the application of innovative cloud software. In this way ZOO provides flexible solutions that combine services with software licensing to meet the diverse needs of clients of all sizes across the creative media industries. ZOO's software is used to create localised entertainment products, packaging and marketing campaigns for some of the best known brands in the world.

Chairman and Chief Executive's Review

Results

The Board is pleased to report a period of solid progress for the Company with results for the six months to 30 September 2014 in line with management expectations. Revenues grew 47% to $6.9m (H1 2013: $4.7m), driven largely by the continued progress from subtitling services delivered using ZOOsubs.

The increasing gross profit contribution from ZOOsubs, which entails the use of subcontract translators as a cost of sales, has led to gross profit margins decreasing to 76% from 89% in the comparative period. Gross profit margins in other parts of the business have, however, remained resilient and, despite ongoing investment to support the rollout of ZOOsubs, including sales, marketing and infrastructure, we report an EBITDA margin similar to the comparative period, with adjusted EBITDA for the period of $0.4m (H1 2013: $0.3m), an increase of 38%.

On 24 November, post period end, the Group announced that it had raised $1.3m (£0.8m) in new working capital support by way of the issue of a new convertible loan note with Herald Investment Trust plc. The key terms are identical to those of the Company's existing Unsecured Convertible Loan Notes of £1,770,500, including a conversion price of 48 pence per ordinary share. Subsequent to this issue, the combined existing and new loan notes have a principal value of £2,570,500.

Operations

The period under review was characterised by the continued diversification of both the Company's client base and revenue mix. This has been the result of growing demand for the Company's ZOOsubs offering, ZOO's proprietary cloud-based subtitling production and management system. As reported at the time of Company's final results in August 2014, this offering now includes subtitling, captioning and dubbing services, all of which can be efficiently addressed through the technology platform.

Revenue from the ZOOsubs proposition is repeating in nature and the increased work volumes in the period have provided the Company with greater visibility over future revenue and resource requirements. As a result of the strong momentum for ZOOsubs, the Company continues to invest in the service in line with market opportunities, including increased sales and marketing resources.

While the pipeline of new business for ZOOsubs remains strong going into the second half of the year, the Board expects some short term effects following a disruptive restructuring taking place within one of the Company's major customers. As a result of these changes some of the work orders placed by this particular customer have been delayed, however the Board remains confident that the orders will resume back to normal levels in the New Year.

Demand for ZOOcore, the Group's cloud-based workflow and collaboration platform, remains robust and continues to contribute to the Group's recurring revenue base.

Board Change

Post period end the Company announced that James Livingston, Non-executive Director, stepped down from the Board with effect from 25 November 2014. The Group intends to appoint a replacement independent non-executive director in due course.

Outlook

The Board is very pleased with the progress achieved in the period under review. The building momentum from the prior year continued into the first half of the year and we are pleased to have grown top line revenues by over 40%. Management focus on the period ahead will be on improving margins and profitability.

We remain encouraged by the increasing interest we are receiving for our Cloud-based solutions, and we believe the propositions we now offer, consisting of differentiated products and services, leave us well placed to continue to grow the business. While restructuring changes within one of the Company's major customers has caused some work projects to be delayed, the Board is confident that this will resume back to normal levels in due course. As ever, we can be impacted by the dynamics of the entertainment industry but we are confident that our broadening range of services is attractive to our increasingly diversified customer base and, as a result, we remain cautiously optimistic about the Group's future prospects.

NOTES

General information

ZOO Digital Group plc ('the company') and its subsidiaries (together 'the group') provide productivity tools and services for digital content authoring, video post-production and localisation for entertainment and packaging markets and continue with on-going 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 8 December 2014.

This consolidated interim financial information has not been audited.

Basis of preparation

The consolidated financial statements of ZOO Digital Group plc and its subsidiary undertakings (the "Group") for the period ended 31 March 2015 will be prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

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 2014, and have been consistently applied, unless stated otherwise.

A copy of the statutory accounts for the year ended 31 March 2014, 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 year end exchange rates are recognised in the income statement.

Group companies

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

· assets and liabilities for each entity are translated at the closing rate at the 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 arise and all resulting exchange rate differences are recognised with foreign exchange translation reserve.

Equity securities issued

No securities have been issued during the period to 30 September 2014, 31 March 2014 or 30 September 2013.

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 2014 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.