Zoo Digital Regulatory News (ZOO)

14 Dec 2005 07:00

Zoo Digital Group PLC14 December 2005 Embargoed until 7.00am 14th December 2005 ZOO DIGITAL GROUP PLC ("ZOO" or "the Group") INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2005 ZOO Digital Group plc ("ZOO" or "the Group") today announces its results for the six months ended 30 September 2005. Financial Highlights • Group turnover increased by 48% to £4.4 million (six months to 30 June 2004: £3.0 million) • Loss before interest, tax, depreciation and amortisation of £2.0m (six months to 30 June 2004: Loss of £1.0 million) • On track to reach Group profitability by financial year end • Successful placing with institutions to raise £3 million (net of expenses) Operational Highlights • First 'Menu Regionalisation' contract signed with major Hollywood studio • Who Wants To Be A Millionaire - Family Picture Edition', 'Wallace & Gromit' and 'Telly Addicts' interactive DVD games completed and delivered to Universal Pictures. Universal will release these games into eight territories throughout the second half of the year • First interactive DVD completed for the US market - 'Wallace & Gromit' published by Snap TV • Management focus on US market and opportunities that Hollywood presents Commenting on the results, Ian Stewart, CEO of ZOO Digital Group plc, said: "The first six months of this year have seen a frenetic level of activity. Wehave signed our first deal with a major Hollywood studio, developed and testedthe technology across a number of new product areas, published a large number ofgames and interactive DVDs for the Christmas market and broken into the USconsumer market. We expect that the commercial results of this activity will beclearly demonstrated in the full year." Enquiries Ian Stewart James Chandler/Helen ThomasCEO, ZOO Digital Group plc Weber Shandwick0114 241 3700 020 7067 0747 John Llewellyn-LloydNoble & Company Limited020 7763 2200 CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT Introduction The first half of this year has marked another positive step change in ZOO'sdevelopment. The Group has firmly established a foothold in the US marketthrough its first major contract with a Hollywood studio and its first publishedinteractive DVD with Snap TV. Detailed discussions continue with other largeentertainment corporates and management is focused on delivering furtherrevenues in this market throughout the rest of the financial year. In addition, ZOO has produced its first 'non-quiz' interactive DVD ("iDVD") gameas well as a host of interactive titles for the Christmas period. Excitingly,the retail industry, driven by consumer demand and an 800% increase in iDVDtitles, has recognised the importance of iDVD's as an entertainment genre and isnow allocating dedicated shelf space separate from space allocated to DVD filmtitles. Overall, applications for DVD-EXTRA, ZOO's unique DVD authoring software, haveprogressed and diversified throughout the first half of this year. This is inparallel with a growing demand for iDVD titles both from consumers and theentertainment industry which wants to match increasing consumer demand withinnovative and efficient production techniques. Financial Review The Group increased turnover by 48% to £4.4 million for the period to 30September 2005 (six months to 30 June 2004: £3.0m) and made a loss beforeinterest, tax and depreciation of £2.0 million (six months to 30 June 2004: lossof £1.0 million). The increase in loss is primarily attributable to continuedinvestment in the DVD-EXTRA technology whilst revenues are expected fromtechnology licensing over the second half. Historically, the Group experiences a much stronger turnover in the second halfof the year, driven by Christmas trading in ZOO's publishing division ZDPL Inaddition, this year there is an especially strong release schedule in the finalquarter of the financial year. ZDPL moved into profitability last year and isexpected to continue its progress in driving profitable revenue growth. There isalso an expectation that further opportunities with regard to DVD productionwill be realised over the second half of the year and therefore ZOO expects thatthe Group as a whole will reach profitability in this financial year. ZOOtech Ltd ZOOtech, the technology division of the Group, continues to focus its activitieson licensing its innovative proprietary technology and firmly believes thistechnology can revolutionise the video production industry. ZOOtech's currentproducts deliver substantial time and cost savings for DVD title producers andits' market focus over the period has been in two areas: Home Video MarketThose companies involved in the production and publishing of home video titles,currently on DVD-Video. The technology products to date are DVD-EXTRA STUDIO andthe Regionalisation Utility for the efficient production of localised DVD menus.Customers include a major Hollywood studio, Technicolor Creative Services,Ascent Media Corporation and Comchoice. This technology allows radical processre-engineering, enabling automation of many DVD production processes thatcurrently depend upon manual labour. ZOOtech's current products deliversubstantial time and cost savings for DVD title producers and the Group firmlybelieves this technology can revolutionise the video production industry. Interactive DVDThose companies involved in the production and publishing of interactiveDVD-Video titles, to which ZOOtech licenses its DVD-EXTRA STUDIO product. Thissoftware is provided to production houses and multimedia developers. ZOOtechgenerally enters into publishing agreements with those companies whocommercialise such products. Companies such as EMI, Universal Pictures, GranadaMedia, Snap TV, IMG/TWI and National Geographic have either released or are inthe process of releasing interactive DVD titles in multiple territories. Theseinclude 'Who Wants To Be A Millionaire', 'Madagascar' , 'Wallace & Gromit DVDGame', 'Now That's What I Call A Music Quiz', 'FA Premier League Super Quiz','Beat the Intro', 'Test the Nation' and 'NCAA Football Trivia Challenge'. ZOOtech's main development project is the 'Post-production Hub', which isintended to overcome the inherent inefficiencies in the currently decentralisedprocess of video production by standardising and centralising operations. Thefirst element of this hub is ZOOtech's 'Regionalisation Utility' which enablesstudios to produce titles in many languages for multiple territories in afraction of the time and cost of the conventional approach. This results intypical savings of multiple millions of dollars for Hollywood studios. One majorstudio has already taken this product and testing is well under way with otherorganisations. The second element of the hub is a project that encompasses an automatedauthoring system to allow efficient production of film titles across multipleplatforms and formats, including DVD-Video, UMD (used by Playstation Portable),HD DVD, Blu-ray Disc and some 'on demand' formats. Again licensees will benefitfrom large annual time and cost savings as well as greater efficiencies andcreative capacity. Prototypes are currently being tested by major organisationsand the Group estimates that this process could be used on a large percentage ofall film DVDs produced. The North American market clearly offers ZOOtech many opportunities, not leastthe potential for relatively large individual deals with film studios andentertainment corporates and technology development partnerships. Consequently,ZOOtech is looking to develop its US business and has focused greater resourcesand management time in driving business development in this area. In particularRobert Deri (Chief Financial Officer) and Dr Stuart Green (Chief TechnicalOfficer) have been working more closely on opportunities that the US presents,concentrating on deepening existing relationships with the major organisationsand working closely with customers regarding process improvement, reduction ofclient in-house production budgets and software solutions. ZOO Digital Publishing Limited ("ZDPL") ZDPL'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, for the first time, dedicating point-of sale areas and actively promotingthis rapidly growing product category. ZDPL has pioneered this development andcompleted four titles during the period, which are being published by UniversalPictures in a number of territories including UK, France, Germany and Japan andsupported by television advertising campaigns. In addition, as previouslyreported in October, ZDPL has for the first time broken into the North Americanmarket through a partnership with Los Angeles based games producer Snap TV topublish ZOO's interactive DVD game "Wallace & Gromit Curse of the Were Rabbit".This game is also the first non-quiz based product to enter the market andcontinues ZOO's history of setting new standards of innovation. Such innovationhas not gone unnoticed and the Group was delighted to win three awards in therecent DVD Association Excellence Awards ceremony in New York City with awardsfor three of its individual titles. In the Video Games business ZDPL has, during the period, been focussed ondelivering its strategy to improve the quality of new games titles that itpublishes with a focus on fewer, higher potential products. In the first sixmonths ZDPL have published a total of 38 new games across a variety of platformsincluding PC, PS2, Xbox, Nintendo Gameboy Advance, Nintendo DS and Sony PSP andhas acquired a number of key titles for release in the final quarter of thefinancial year. These include 'Ty3: Night of the Quinken', 'LA Rush', 'Narc','Seaworld Adventure Parks Tycoon 3D' and 'American Chopper - The Full Throttle'. ZDPL is therefore confident that it can publish attractive and popular titlesthat will appeal to consumers. However, ZOO remains conservative in its outlookfor sales during the second half given the current uncertainties in the retailmarket. Outlook The last six months have seen the Group continue to grow and progress its keyactivities. The next six months will see us build further on this by deliveringsolid revenues on the publishing side and further exploiting our DVD authoringtechnology. Overall both subsidiaries have continued to progress strongly as thegroup continues to focus on areas where near-term revenues and the large andaccessible market opportunities exist. We would like to take this opportunity, on behalf of the Board, to thank allZOO's staff for their continued hard work and commitment over the last sixmonths. M J BarnesChairman I C StewartChief Executive Officer 14 December 2005 ZOO DIGITAL GROUP PLCCONSOLIDATED UNAUDITED PROFIT & LOSS ACCOUNTINTERIM RESULTS TO 30 SEPTEMBER 2005 6 months to 6 months to 15 months to 30-Sep-05 30-Jun-04 31-Mar-05 Unaudited Unaudited Audited £'000 £'000 £'000 Turnover 4,395 3,012 12,669 Cost of sales (2,911) (1,808) (7,611) --------------------------------------------------Gross profit 1,484 1,204 5,058 Other operating expenses (3,508) (2,203) (6,647) --------------------------------------------------Loss before interest, tax, depreciation and amortisation (2,024) (999) (1,589) Depreciation (82) (57) (155)Amortisation of goodwill (241) (234) (593) --------------------------------------------------Operating loss (2,347) (1,290) (2,337) Interest payable (50) (15) (42)Investment income 11 79 99 -------------------------------------------------- Loss before tax (2,386) (1,226) (2,280) Taxation - - 53 --------------------------------------------------Retained loss (2,386) (1,226) (2,227) ================================================== Loss per ordinary share (0.79p) (0.44p) (0.80p) ZOO DIGITAL GROUP PLCCONSOLIDATED UNAUDITED BALANCE SHEETINTERIM RESULTS TO 30 SEPTEMBER 2005 6 months to 6 months to 15 months to 30-Sep-05 30-Jun-04 31-Mar-05 Unaudited Unaudited Audited £'000 £'000 £'000 Fixed Assets Tangible 405 225 377 Intangible 3,127 3,391 3,351 -------------------------------------------------- 3,532 3,616 3,728 Current Assets Stock 1,005 357 903 Debtors 6,284 3,198 5,937 Cash - 2,974 - -------------------------------------------------- 7,289 6,529 6,840 Current LiabilitiesCreditors (3,263) (2,225) (3,630) Net current assets 4,027 4,304 3,210 Long term liabilities - - - -------------------------------------------------- 7,558 7,920 6,938 ================================================== Equity Called up share capital 635 559 559 Share premium 21,649 18,700 18,719 Other reserves 8,598 8,598 8,598 Reserves (22,995) (19,608) (20,609) Interest in own shares (329) (329) (329) -------------------------------------------------- 7,558 7,920 6,938 ================================================== ZOO DIGITAL GROUP PLCCONSOLIDATED UNAUDITED CASH FLOW STATEMENTINTERIM RESULTS TO 30 SEPTEMBER 2005 6 months to 6 months to 15 months to 30-Sep-05 30-Jun-04 31-Mar-05 Unaudited Unaudited Audited £'000 £'000 £'000Net cash outflow from operating activities (3,230) (1,156) (4,302) Returns on investment and servicing of finance (39) 64 57Capital expenditure and financial investment (127) (538) (1,107) --------------------------------------------------Net cash outflow before financing (3,396) (1,630) (5,352) Financing 3,006 (847) (828) --------------------------------------------------(Decrease) / increase in cash in the period (390) (2,477) (6,180) ========= ======== ========= Reconciliation of operating loss to net cash flow from operating activities Operating loss (2,347) (1,290) (2,337)Depreciation charge 82 57 155Goodwill amortisation 241 234 593(Increase) / Decrease in stock (102) 37 (509)(Increase) / Decrease in debtors (347) (91) (2,777)(Decrease) / Increase in creditors (757) (103) 573 ----------------------------------------------------Net cash outflow from operating activities (3,230) (1,156) (4,302) ================================================== Analysis of changes in cash and cash equivalents (Decrease) / increase in cash in the period (390) (2,477) (6,180)Cash outflow from decrease in debt - 858 858 ---------------------------------------------------- (390) (1,619) (5,322)Net (debt)/ funds at start of period (729) 4,593 4,593 ----------------------------------------------------Net (liabilities) / funds at end of period (1,119) 2,974 (729) ================================================== Analysed as followsBank overdraft (1,119) - (729)Cash at bank in hand - 2,974 - ---------- ---------- --------- (1,119) 2,974 (729) ================================================== NOTES Board approval The interim accounts were approved by the board of directors on 13th December2005. Nature of accounts The financial information for the six months ended 30 September 2005 and 30 June2004 is unaudited and does not constitute statutory accounts within the meaningof Section 240 of the Companies Act 1985. The information has been prepared onthe basis of accounting policies used in the financial statements to 31 March2005. The financial information for the period ended 31 March 2005 is extracted fromthe audited accounts for that period. The auditors' report on those accounts wasunqualified and did not contain a statement under Section 237(2) or (3) of theCompanies 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 300,599,003 (June 2004: 279,058,585; March 2005:279,333,785). 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. Gains and losses The company had no recognised gains or losses in the current period other thanthe loss for the period. Further Copies Copies of this announcement and the Interim Report for the six months ended 30September 2005 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