This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 as retained as part of UK law by virtue of the European Union (Withdrawal) Act 2018 as amended. Upon the publication of this Announcement, this inside information is now considered to be in the public domain.
14 July 2023
ZOO DIGITAL GROUP PLC
("ZOO", the "Group" or the "Company")
Trading Update
IFRS 15 guidance and update on Q1 trading
ZOO Digital Group plc (AIM: ZOO), a leading provider of end-to-end cloud-based localisation and media services to the global entertainment industry, today provides guidance on its interpretation of IFRS 15 ahead of full year results, which are now expected to be announced in early August 2023, and an update on Q1 trading.
IFRS 15 guidance
As part of the audit work for the year-end 31 March 2023 the Company has received revised guidance from its auditors with regards to the interpretation of IFRS 15. Specifially, that third party costs should not be matched with revenue, as per the Company's existing accounting policies, but rather as supplier invoices are received. Revenues are not affected by this change.
Subject to finalisation of audit procedures and technical review, the effect of this accounting policy change is expected to be an increase in adjusted EBITDA for FY23 of approximately $2 million and an expected downwards restatement to adjusted EBITDA of approximately $1.2 million in FY22.
Update on Q1 trading
First quarter FY24 trading has been impacted due to a well publicised hiatus in the normal flow of orders across the industry, resulting in lower revenues than previous management expectations in a quarter that the Board already expected to be weaker than the previous year.
This has been caused by two short-term market factors that are affecting the wider industry. Firstly, several of ZOO's major streaming company clients have for some months been implementing cost-saving measures and reorganising their operations as the industry evolves and confronts higher levels of competition, leading to the deferment of some costs. Secondly, the Writers Guild of America strike is in its third month and this is now having an impact on the levels of localisation and media services work on new titles.
Despite the short term industry-wide uncertainly alluded to above, ZOO expects to be in an even stronger position with several customers following a rationalisation of their supplier bases with ZOO selected as one of a smaller number of vendors. Consequently, the Board expects the Company to take further share of the media localisation market once former business levels resume. It is reasonable to expect this to be in the second half of the current financial year, and on this basis the Board currently expects revenue growth to return in the second half of FY24.
The Group is financially strong with net cash of $23 million as at 30 June 2023.
ZOO continues to have positive, advanced discussions with a leading Japanese technology company regarding the acquisition of its localisation subsidiary.
The persons responsible for arranging for the release of this Announcement on behalf of ZOO are Stuart Green, Chief Executive Officer and Phillip Blundell, Chief Financial Officer of ZOO.
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About ZOO Digital Group plc:
ZOO Digital supports major Hollywood studios and streaming services to globalise their content and reach audiences everywhere, by providing leading, technology-enabled localisation and media services.
Founded in 2001, ZOO Digital operates from hubs in Los Angeles, London, Dubai, Turkey, South Korea, India, Denmark and Spain with a development and production centre in Sheffield, UK.
The Group provides media services through its platforms that include: ZOOsubs, ZOOdubs and ZOOstudio. Its full-service proposition delivers the end-to-end services required to prepare both original and catalogue content for digital distribution; these services include dubbing, subtitling & captioning, metadata creation & localisation, mastering, artwork localisation and media processing. Alongside this offering, ZOO also provides its customers with management platforms and strategic solutions to support their own internal globalisation operations.
ZOO is a go-to service partner for media businesses looking to globalise their content across different territories, languages and distribution platforms. Using its innovative technology-enabled approach, ZOO helps its customers to reduce time to market, lower costs and deliver high quality products to their global audiences. The business has frameworks in place with all major Hollywood studios and streaming services. Its customers include Disney, NBCUniversal, HBO and Paramount Global.
ZOO's competitive advantage arises from three interlinking factors - the leading role it has played in the digital transformation of its sector; the world class proprietary platforms that it develops to enable this transformation; and the global supply chain of thousands of freelancers, working collaboratively in ZOO's platforms, which delivers services that scale easily to meet demand. These factors combine to make ZOO uniquely placed to capitalise on new market opportunities in a fast-paced and constantly evolving industry.
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