Zoo Digital Regulatory News (ZOO)

9 November 2015

ZOO DIGITAL GROUP PLC

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

Interim Results

ZOO Digital Group plc, the provider of cloud-based media production services and software to the creative media industries, today announces its financial results for the six months ended 30 September 2015.

HIGHLIGHTS

Operational highlights

· Overall client numbers grown by 30% over corresponding prior year period

· Launched new metadata production and localisation services

· Secured preferred localisation vendor status for a growing number of clients

· Continued investment in ZOOcore and ZOOsubs

Key Financials

· Revenues $6.6m (H1 2014: $6.9m)

· Gross profit margin increased to 83% (H1 2014: 76%)

· EBITDA more than doubled to $0.9m (H1 2014: $0.4m)

· Operating profit $0.4m (H1 2014: loss of $0.3m)

Stuart Green, CEO of ZOO Digital, commented, "The Board is pleased with the progress achieved in the period under review, and in particular on the diversification of the business with overall client numbers growing by more than 30%.

"While the entertainment industry continues to undergo rapid change, we are confident that our range of services is appropriate to address the evolving needs of the market and remain cautiously optimistic about the Group's future prospects."

Ends

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About ZOO Digital Group plc:

ZOO Digital is a provider of cloud-based media production services and software to the creative media industries, predominantly in entertainment. 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, digital 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 2015 in which EBITDA rose to $0.9m (H1 2014: $0.4m), delivering an operating profit of $0.4m (H1 2014: loss of $0.3m).

A 5% decline in sales to $6.6m (H1 2014: $6.9m) was due primarily to a major client's restructuring, which commenced in H2 2014, and that we understand has finally concluded. During the corresponding prior year period this client contributed one third of our total sales. For the period under review the Board is pleased to report significant progress from new clients, with overall client numbers growing by over 30%, contributing sales that have almost replaced the shortfall caused by this disruption. The growth in overall client numbers has been in the areas of localisation and digital distribution services. Following the conclusion of our client's restructuring we are now in discussions with the aim of re-establishing some of this former business.

Cash flow from operations was positive in the first half. Net debt increased by $0.2m over the six month period as a result of on-going investment in the business together with financing costs, mitigated through the receipt of R&D tax credits. Cash flow from operations in H2 is expected to be neutral with the Board continuing to manage the business throughout the period within available facilities.

Gross profit margins increased from 76% to 83% as a result of a mix of higher margin services.

Operations

The Company continues to strengthen its differentiated service position through its proprietary cloud-based localisation, digital packaging and workflow management platforms. These platforms underpin the Company's localisation service offerings, which include subtitling, captioning and dubbing, and have been expanded with the launch of a range of metadata management services.

Preparation of entertainment media metadata, which includes information such as plot synopses, character names, production crew and actors, is undergoing significant growth. This is primarily due to the diverse requirements of the growing number of digital distribution services of which there are now more than 100, including Netflix, Apple iTunes and Amazon Instant Video. Consumers now expect that digital video services will provide a wealth of information for each programme and this has created a new industry requirement for the supply of metadata. Furthermore, international exploitation of content necessitates localising metadata into the growing number of languages into which consumer services are now delivered. ZOO is ideally placed to fulfil this market requirement from its position as a provider of both media workflow platforms and services for localisation and digital packaging. The Board's expectation is that demand is set to grow further as video service providers seek to differentiate themselves through more sophisticated use of metadata, such as in conjunction with voice-controlled devices.

Clients are increasingly choosing ZOO as a provider of localisation services due to the benefits afforded by its cloud platforms. These include full visibility of work in progress, a secure and centralised repository for localisation materials and integration with client-side information systems. The Company participates in the tendering processes operated by many larger rights owners in the entertainment industry and as a result has secured preferred vendor status for a growing number of clients.

The Board is pleased to note that ZOO was shortlisted in the inaugural Innovate UK Small Business Innovation Awards for its ZOOcore platform. The awards, run by the UK's innovation agency, Innovate UK, recognise Britain's most exciting, cutting-edge, growing companies. ZOOcore was shortlisted in the 'Innovation leading to productivity improvement' category.

Outlook

The Board is pleased with the progress achieved in the period under review, and in particular with the diversification of the business evidenced by the growth in overall client numbers. Consistent with the prior year we have delivered an improved result for H1 vs our prior year H2 and management focus continues to be on improving margins while growing revenues.

The Company is actively engaged in commercial discussions with a growing number of significant prospects and the Board remains confident of being able to scale its operations efficiently over time.

While the entertainment industry continues to undergo rapid change, we are confident that our range of services is appropriate to address the evolving needs of the market and 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 6 November 2015.

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 2015, and have been consistently applied, unless stated otherwise.

A copy of the statutory accounts for the year ended 31 March 2015, 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 2015, 31 March 2015 or 30 September 2014.

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 2015 will be available, free of charge, for a period of one month 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.