Zoo Digital Regulatory News (ZOO)

21 November 2012

ZOO DIGITAL GROUP PLC

("ZOO" or "the Group")

INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2012

ZOO Digital Group plc, the provider of workflow management software and services for creative media production, today announces its financial results for the six months to 30 September 2012.

HIGHLIGHTS

Operational highlights

·; Profitable first half of the year

·; Strong growth in EST and Blu-ray production

·; ZOO Subtitling tool continues to gain traction

·; Increasing demand to develop tailored, workflow management solutions

Key Financials

·; Revenues increased to $6.2m (H1 2011:$5.9m)

·; Operating profit of $0.2m (H1 2011: loss of $1.1m)

·; Cash at period end of $0.3m (H1 2011: $1.5m)

·; EPS of 0.09 cents (H1 2011: loss 7.01 cents)

Stuart Green, CEO of ZOO Digital, commented,

"I am pleased to report that the Group was profitable in the first half of the year, driven by an enhanced product portfolio and our focus on higher margin areas.

"Whilst there still remains a certain amount of volatility in our markets, we believe that this disruptive influence will ultimately prove beneficial to ZOO. Our systems enable customers to de-risk their business by having a greater degree of control over their work processes and we believe that this will become increasingly attractive across multiple segments of the creative services industry.

"We go into the second half with a broader product set and many opportunities to diversify our customer base and we remain cautiously optimistic."

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The Company further wishes to draw attention to the posting on its website (www.zoodigital.com) of a presentation to shareholders regarding its interim results.

Chairman and Chief Executive's Statement

The Company provides the following report on the first six months of the year.

We are pleased to announce that ZOO has had a profitable start to the year, in contrast to the difficult first half of last year where we were affected by the volatility of the Home Entertainment market. Revenue has increased to $6.2 million (2011: $5.9 million) leading to an operating profit of $0.2 million (2011: $1.1 million loss). This improvement in profitability is the result of a diversification in revenue sources and a greater contribution from higher margin services and software licensing.

A significant proportion of ZOO's revenue comes from the supply of products and services for the Home Entertainment market, with customers including film and TV programme makers in Hollywood and elsewhere. For the past two years this market has been undergoing significant change due to a large number of factors, most notably the growth of on-demand electronic distribution services.

In the year to March 2012 the decline in the number of home entertainment products introduced into the market by ZOO's clients led to a reduction in revenues. This has subsequently stabilised, although market conditions continue to be difficult. According to the Digital Entertainment Group (DEG), consumer spending on home entertainment rose 0.24% in the third quarter of 2012 compared with prior year, made up of a decline in mature parts of the market, such as DVD-Video, offset by growth in new market areas including Electronic Sell Through (EST), Video on Demand (VOD) and Blu-ray Disc. We have experienced pricing pressures from established vendors in areas such as DVD services, and continue to observe consolidation in this market. ZOO's workflow tools are designed to work for all platforms and therefore any increase in the number of titles produced, irrespective of format, results in an increased throughput for ZOO. There has been particularly strong growth in EST and Blu-ray which, according to the DEG, have grown in the third quarter by 38% and 13% respectively.

During the first half of the year we introduced our cloud-based subtitle production system, ZOOsubs. We have signed up a number of customers who are now using this service to repurpose existing subtitles for new electronic delivery formats such as iTunes. Feedback has been positive and we anticipate adding further licensees from which we will generate recurring revenues as ZOOsubs is adopted for both conversion and origination of subtitle data.

We have continued to develop tailored workflow management solutions and have deployed several new systems in the period to groups involved in the production of creative media, including those working on feature films, TV series and electronic books. A large number of the new systems we have built and deployed have arisen through repeat business with satisfied clients who have sought to replicate the efficiency benefits through introduction in other parts of their operations.

Whilst we have secured further new clients in the eBook market and have now licensed our software to a number of the leading US book publishers, we have not yet seen the large participants in this market commit fully to eBook formats for their back catalogues of illustrated titles. Our ZOO eBook Builder software enables existing print source files to be repurposed quickly and easily for publishing on eReader devices, and we are well positioned to secure new business if leading publishers embrace electronic formats for their illustrated titles. However, until we see evidence of commitment to electronic illustrated titles, we must remain cautious about our expectations for the profit potential of this market.

We continue to invest in research and development to create new technologies that strengthen our product set and facilitate our scalable business model from which we generate recurring revenues as a result of strong customer and partner relationships. This is particularly true of our workflow management solutions that are priced on a per-user-per-month basis, and where enhanced functionality usually leads to greater adoption and therefore increased licensing income.

Outlook

We remain cautious about volatility in the market. Our business may be disrupted by new entrants and new ways of doing business, and we are conscious of the potential for desperate actions by established vendors under threat. Overall, however, we believe that this disruption should be positive for us as clients seek to de-risk their businesses by taking greater control over the production process, which our systems enable. It is our belief that the benefits our systems deliver will become increasingly attractive across multiple segments of the creative industries. We go into the second half with a broader product set and many opportunities to diversify our customer base and we remain cautiously optimistic.

Notes to Editors

About ZOO Digital Group plc

ZOO Digital Group plc provides software and related services that support the authoring, re-purposing and distribution of creative media. ZOO's products form an integrated suite of cloud-based and desktop applications for audio/visual content and printed materials, adapting these media for different languages, formats and delivery mechanisms.

By centralising editorial and approval processes via secure cloud-based platforms, ZOO's proprietary patented software helps customers to increase their speed of production, reduce costs and protect their brand integrity. ZOO's services enable quicker and more cost effective processes across a wide range of applications and formats, including packaging, printed materials, DVD, Blu-ray Disc, video on demand, electronic sell-through, broadcast, music and electronic books.

The Group's largest customers include major Hollywood studios, for which the production, marketing and distribution of titles in numerous formats across many geographies and languages has previously been a lengthy, costly and largely manual process. Increasingly the Group's software is benefiting a variety of companies across sectors where the development of media products, printing, packaging and marketing involves complex processes in multiple countries and languages, particularly where brand integrity is of core importance.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

for the six months ending 30 September 2012

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

as at 30 September 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

for the six months ending 30 September 2012

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

for the six months ending 30 September 2012

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 20 November 2012.

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 2013 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 2012, and have been consistently applied, unless stated otherwise.

A copy of the statutory accounts for the year ended 31 March 2012, 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

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 2012 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.