TIDMZOO
RNS Number : 2194J
Zoo Digital Group PLC
27 June 2017
27 June 2017
ZOO DIGITAL GROUP PLC
("ZOO" or "the Group")
FINAL RESULTS FOR THE YEARED 31 MARCH 2017
ZOO Digital Group plc, the provider of subtitling and digital
distribution services for the global entertainment industry, today
announces its audited financial results for the year ended 31 March
2017.
HIGHLIGHTS
Operational highlights
-- Large increase in revenue and client numbers, with dependency
on the single largest client reduced to 44% of total despite an
increase in that client's spend with ZOO
-- Increasing volume of over the top (OTT) consumption reducing seasonal weighting
-- Approved vendor status for a number of large content creators and key digital platforms
-- Critical acclaim for new product launches which should lead to additional revenue streams
Key Financials
-- Revenue increased by 42% to $16.5 million (2016: $11.6 million)
-- EBITDA showed a significant improvement to $1.8 million (2016: $0.2 million)
-- Profit Before Tax of $0.5 million (2016: loss of $1.5 million)
Post Period End
-- Placing and Subscription raising GBP2.58 million with new and
existing institutional shareholders
-- GBP1.1 million of debt capitalised
-- Extension of the maturity date of the remaining convertible loan note
Copies of the Report and Accounts for the year ended 31 March
2017 are available to view on the Group's website
www.zoodigital.com.
Stuart Green, CEO of ZOO Digital, commented,
"ZOO made considerable progress with a strongly improved
financial performance driven by the strength of our differentiated
services enabled by our innovative cloud technology. The
improvement experienced through the second half of the year has
carried on into the new financial year and the current pipeline of
work is considerably stronger than at the corresponding prior
period.
"The Group has a more diverse client base and is becoming
increasingly recognised as an innovative provider of vital
solutions for an industry in which distribution channels and needs
have been fundamentally transformed. With approved vendor status
for a number of key digital platforms, ZOO is an obvious choice for
content owners looking to maximise their reach.
"The Group has a stronger balance sheet and the increased
funding that it has secured, along with an enlarged sales team,
should enable it to take advantage of the market opportunity. With
continuing momentum for the Group's existing tools and a number of
exciting new solutions to clients' localisation and security needs,
the board looks to the current year and beyond with
confidence."
For further enquiries please contact:
ZOO Digital Group plc 0114 241 3700
Stuart Green - Chief Executive
Officer
Helen Gilder - Chief Finance
Officer
finnCap Ltd
Henrik Persson / Emily Watts
/ Alex Price (corporate finance)
Camille Gochez (corporate broking) 020 7220 0500
Alma PR
Josh Royston / Hilary Buchanan 0778 090 1979
The Company further wishes to draw attention to the posting on
its website (www.zoodigital.com) of a presentation to shareholders
regarding its final results.
CHAIRMAN'S STATEMENT
The Board is very pleased with the progress that continues to be
made by the Group. The large increase in revenue, significant
expansion of the client base and improvement in profitability
described in this report are very tangible signs of the
transformation that has been accomplished by management during the
last few years.
ZOO is now positioned as one of the most innovative providers of
software-driven localisation services to the major producers and
distributors of TV and movie content around the world. Demand for
our services is growing rapidly, driven by the increase in digital
entertainment content, the expansion of distribution channels, and
disruptive innovation in the sector by vendors such as Amazon,
Hulu, Apple and Google. The Board is therefore delighted with the
support provided by our stakeholders post year end in May 2017
which has enabled the Group to reduce significantly its debt and
increase its cash resources, thereby equipping us to capitalise on
this exciting growth opportunity.
Roger D Jeynes
Chairman
STRATEGIC REPORT
Operational review
Introduction
I am pleased to be able to report that the year under review was
one of considerable progress for ZOO, both from a financial and an
operational perspective. Revenue for the year increased by 42% to
$16.5 million (2016: $11.6 million) and earnings before interest,
tax, depreciation and amortisation (EBITDA) showed a significant
improvement to $1.8 million (2016: $0.2 million). The Group
pleasingly returned to profit at the pre-tax level of $0.5 million
from a loss of $1.5 million in the prior year.
This follows on from the success of winning new clients in the
previous year and is the result of those wins starting to have an
effect on both the top and bottom lines. As previously mentioned,
the Group's client list now includes all of the six major Hollywood
studios as well as other leading producers of feature film and
episodic TV programmes in North America and Europe. Whilst our
largest client increased its total spend with ZOO during the year,
it reduced as a percentage of total sales to 44% (2016: 60%), a
trend that the Directors would expect to continue given the current
sales momentum with a more diverse client base. This is due to
increased revenues from other existing clients and a growth of 25%
in the number of clients invoiced during the year.
Key Drivers
The bulk of the growth came from localisation services, of which
subtitling remains a key tenet. ZOO's services are delivered using
its innovative cloud technology and allow TV and movie content to
be subtitled in any language and prepared for sale with all major
online retailers as well as on optical disc. The volume of work on
physical products, namely DVD and Blu-ray, increased in the year
but the main driver was undoubtedly the growth in content for sale
through digital platforms now widely available from a growing
number of "Over-The-Top" (OTT) providers. This follows Apple's
selection of ZOO in February 2016 as an iTunes aggregation service
provider for TV series and, in May 2016, the award of approved
vendor status by another of the largest online entertainment
retailers in the industry.
The transition towards digital consumption of entertainment has
been the greatest single change to the industry in modern times and
now that this form of delivery has been widely welcomed and adopted
by the mass market it is difficult to envisage such a cultural
change again any time soon. There are several advantages for ZOO in
this regard. Firstly, it is easier for content owners to reach a
much wider audience through digital rather than physical products
as the supply chain is much simplified. Consequently, content has
become commercially available in more and more geographies and as
the territorial reach increases so does the need for subtitling
into additional languages. A TV series that was previously
translated into fewer than ten major European languages will now
potentially be translated into 50 or more, which increases the
scope of work for ZOO. A second benefit has been the dilution of
seasonal weighting in the business. Preparation of products for
physical distribution is typically geared towards release at
specific times in the calendar when retailers experience increased
footfall and gifting seasons such as Thanksgiving and Christmas.
This means that content owners place the majority of orders during
the summer months, and therefore sales for ZOO have in the past
been weighted more towards the first half of the year than the
second. Our experience in the year under review, where revenues in
the second half of the financial year were stronger than in the
first, is in part a reflection of the fact that digital consumption
continues at a similar pace throughout the calendar year and there
is therefore reduced seasonal fluctuation in the demand for our
services.
Investment in products and people
The improved financial performance is the result of investments
made in previous years in the Group's proprietary technology
platforms. This focus on R&D has continued with further
resources for the continued development of existing platforms and
investment in two new propositions: ZOOdubs and ZOOscreen.
With a strategic approach that parallels that of our subtitling
platform, ZOOdubs is designed to improve the dubbing workflow for
TV and movie content owners by accelerating time-to-market,
enhancing quality and enabling greater affordability in the
creation of localised materials that are essential for fulfilling
regional consumer expectations across the world. Officially
launched at the National Association of Broadcasters ("NAB") event
in the USA in 2017, ZOOdubs was awarded a 'best of Show' accolade.
Although not planned to be formally released for revenue generation
until late 2017, the level of interest shown from clients and
prospects at NAB was highly encouraging and market data reaffirms
the Board's belief in its potential to lead to significant
revenues. According to research in June 2017 from the Media &
Entertainment Services Alliance (MESA) Europe, the Total EMEA
market in 2016 for entertainment localisation (subtitling,
captioning and dubbing) was estimated at around $2 billion, with
70% of that attributable to dubbing services. The market value is
forecast to grow by 8%-10% per annum, primarily due to two
factors:
-- the overall growth in OTT consumption (streaming video on
demand and download services); and
-- the increase in geographical expansion.
ZOOscreen is designed to stream and showcase video materials and
screening copies securely and privately to clients, voice actors,
prospects and judging panels. This system, which is an essential
building block of our dubbing workflow, is currently in trials with
major film studios and remains on course to be released in 2017.
Although adoption of this platform will require the approval of a
number industry groups and security protocols, client feedback on
ZOOscreen has so far been favourable and has confirmed the Board's
belief that the system fulfils an important requirement in the
market.
With both of these new platforms the Board believes that the
strength of its existing relationships and its increasing
reputation as a technological innovator in the industry will help
it to cross sell these services into its client base as well as
attracting additional new clients. In February 2017, ZOO was named
by the organisers of TVConnect, a leading industry event for the
entertainment industry, as one of the top ten innovators of 2016,
alongside major global brands such as Amazon, Sky, Google, BBC and
Apple and was the only company involved in localisation amongst the
25 names recognised.
To support the sales initiative, Tony Ferkranus has been
appointed as Vice President of Sales for the Americas to focus on
developing ZOO's client base in key territories across the USA,
Canada and South America. Tony previously held the same position at
both Visual Data Media Services and Deluxe Entertainment.
In the UK, the Group moved into new headquarters in Sheffield,
primarily to meet the stringent content security standards required
by major US studios. It is pleasing to announce that ZOO has been
certified as compliant with the Content Protection and Security
standard administered by the Content Delivery and Security
Association (CDSA) which clears a hurdle to securing further
work.
I would like to extend my sincere thanks to all members of the
ZOO team in the UK and US for their innovative spirit, can-do
attitude and teamwork which have been pivotal to achieving the
significant progress that the Group has made over the period.
Affiliate Partnerships
The affiliate partner network has continued to expand throughout
the year and currently consists of 10 partners in emerging markets,
with further additions expected to be announced in the coming
months. This network has been formed to meet the evolving needs of
the entertainment industry, offering global online retailers a
local partner in key territories. Each member will benefit from
ZOO's cloud computing systems to enable efficient collaboration and
provide localisation and digital distribution services. ZOO expects
to receive licensing income and access to resources in each
territory.
Fundraising and Conversion of Debt
Post the period end, in May 2017, the Group raised GBP2.6
million of gross proceeds from the Placing and Subscription of New
Ordinary Shares, whilst also further strengthening the Group's
balance sheet by capitalising GBP1.1 million of debt. On behalf of
the Board I would like to welcome the new shareholders to the
register at an exciting time for ZOO and also thank existing
holders for their continued support. The additional funds will
enable the Group to take on further human resources to meet the
demand for its subtitling services, particularly in the field of
translation, and progress is already being made on that front.
Outlook and Prospects
The improvement experienced through the second half of the year
has carried on into the new financial year and the current pipeline
of work is considerably stronger than at the corresponding prior
period.
The Group has a more diverse client base and is becoming
increasingly recognised as an innovative provider of vital
solutions for an industry in which distribution channels and needs
have been fundamentally transformed. With approved vendor status
for a number of key digital platforms, ZOO is an obvious choice for
content owners looking to maximise their reach.
The Group has a stronger balance sheet and the increased funding
that it has secured, along with an improved sales team, will enable
it to take advantage of the market opportunity. With continuing
momentum for the Group's existing tools and a number of exciting
new solutions to clients' localisation and security needs, the
Board looks to the current year and beyond with confidence.
Stuart Green
Chief Executive Officer
FINANCIAL REVIEW
The year ended 31 March 2017 has been a strong and
transformational year for ZOO. We are pleased to report a
substantial increase in turnover and a very significant increase in
EBITDA from $0.2m to $1.8m.
The reported turnover was $16.5m, representing a 42% increase
over the prior year (2016: $11.6m). Importantly, we are pleased to
note that the second half of the financial year has shown growth,
generating turnover of $8.7m compared to $7.8m in the first half of
the year. This is a very pleasing result given that historically
the business has shown significant seasonality with a much stronger
first half.
The gross margin generated was $12.0m compared to $9.2m in the
prior year, an increase of 30%. The gross margin achieved was 73%,
a reduction from the 79% reported last year due to an increased
portion of the turnover being generated from localisation services
that incur outsourcing costs of independent translators around the
world. The margin achieved on these services is a key metric
monitored by management and we continuously make improvements to
technology and processes to maximise the margin.
The operating expenses increased by 13% to $10.4m (2016: $9.2m).
The largest portion of the costs relates to staffing where
investment has been made in strengthening the sales and marketing
team and in recruiting staff to coordinate localisation services
for the growing client base.
We continue to have very good client relationships and links
with our largest client remain strong. Sales to this major
Hollywood studio have grown at around 10% per year for the past few
years but with the development of several significant new
relationships their proportional contribution is much reduced. The
growth in sales from other clients has increased by 90% since the
prior year.
The improved financial performance has resulted in cash
generation from operations of $1.5m compared to a cash outflow of
$0.4m in the prior year. We continue to gain R&D tax credits
from HMRC and received a repayment of $0.3m in the year just
ended.
Since the end of the financial year we have been pleased to
announce equity fundraising, the conversion of debt into equity and
the extension of the maturity of the remaining convertible loan
notes. This results in a significantly strengthened balance sheet.
The unaudited pro-forma statement of net assets below is indicative
of the position had the transaction taken place on 31 March
2017.
Pro-forma
Statement statement
of of net
net assets
assets after
as fundraising
reported (unaudited)
ASSETS $'000 $'000
Non-current assets
Property, plant and
equipment 1,073 1,073
Intangible assets 6,915 6,915
Deferred income tax
assets 486 486
============================= ========== =============
8,474 8,474
============================= ========== =============
Current assets
Trade and other receivables 3,753 3,753
Cash and cash equivalents 607 3,505
============================= ========== =============
4,360 7,258
============================= ========== =============
Total assets 12,834 15,732
============================= ========== =============
LIABILITIES
Current liabilities
Trade and other payables (4,045) (3,964)
Borrowings (4,102) (281)
============================= ========== =============
(8,147) (4,245)
============================= ========== =============
Non-current liabilities
Borrowings (2,126) (4,574)
============================= ========== =============
Total liabilities (10,273) (8,819)
============================= ========== =============
Net assets 2,561 6,913
============================= ========== =============
The cash balance at the year end was $0.6m compared to $0.3m in
the prior year. We have continued to use the invoice finance
facilities to fund the working capital with the year end balance
being $0.7m (2016: $0.6m). With the post year end cash injection
the working capital within the business is much improved and the
reliance on invoice financing facilities is reduced.
With a significantly strengthened balance sheet and positive
trading we look forward to the period ahead with optimism.
By order of the board
Helen P Gilder
Director and Secretary
FINANCIAL INFORMATION
The financial information set out here for the year ended 31
March 2016 does not constitute full statutory financial statements
as defined in section 434 of the Companies Act 2006 but has been
extracted from the Group's financial statements for that period.
Statutory financial statements for the year ended 31 March 2016
were approved by the directors on 5 July 2016, but have not yet
been delivered to the Registrar of Companies. Those financial
statements were reported upon without qualification by the
independent auditor and did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2017
2017 2016
Note $000 $000
---------------------------------------------- --------- ---------
Revenue 16,488 11,638
Cost of sales (4,483) (2,399)
Gross Profit 12,005 9,239
Other operating income 196 115
Other operating expenses (10,432) (9,198)
----------------------------------------------- --------- ---------
Profit before interest, tax,
depreciation and amortisation 1,769 156
----------------------------------------------- --------- ---------
Depreciation (259) (181)
Amortisation (1,008) (1,078)
----------------------------------------------- --------- ---------
Total operating expenses (11,699) (10,457)
----------------------------------------------- --------- ---------
Operating profit/(loss) 502 (1,103)
----------------------------------------------- --------- ---------
Exchange gain on borrowings 624 206
Finance cost (591) (559)
----------------------------------------------- --------- ---------
Total finance income/(cost) 33 (353)
----------------------------------------------- --------- ---------
Profit/(loss) before taxation 535 (1,456)
Tax credit 256 669
----------------------------------------------- --------- ---------
Profit/(loss) and total comprehensive
income for the year attributable
to equity holders of the parent 791 (787)
----------------------------------------------- --------- ---------
Profit/(loss) per share 3
========================= =========== =======
(2.41)
basic 2.42 cents cents
========================= =========== =======
(2.41)
diluted 2.42 cents cents
========================= =========== =======
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2017
2017 2016
Note $000 $000
================================ ===== ========= =========
ASSETS
Non-current assets
Property, plant and equipment 1,073 433
Intangible assets 6,915 7,382
Deferred income tax assets 486 486
================================ ===== ========= =========
8,474 8,301
================================ ===== ========= =========
Current assets
Trade and other receivables 3,753 2,531
Cash and cash equivalents 607 314
================================ ===== ========= =========
4,360 2,845
================================ ===== ========= =========
Total assets 12,834 11,146
================================ ===== ========= =========
LIABILITIES
Current liabilities
Trade and other payables (4,045) (3,096)
Borrowings 6 (4,102) (142)
================================ ===== ========= =========
(8,147) (3,238)
================================ ===== ========= =========
Non-current liabilities
Borrowings 6 (2,126) (6,142)
================================ ===== ========= =========
Total liabilities (10,273) (9,380)
================================ ===== ========= =========
Net assets 2,561 1,766
================================ ===== ========= =========
EQUITY
Equity attributable to equity
holders of the parent
Called up share capital 5 7,236 7,236
Share premium reserve 37,007 37,014
Other reserves 12,320 12,320
Share option reserve 328 317
Convertible loan note reserve 42 42
Foreign exchange translation
reserve (992) (992)
Accumulated losses (53,360) (54,151)
================================ ===== ========= =========
2,581 1,786
================================ ===== ========= =========
Interest in own shares (20) (20)
================================ ===== ========= =========
Attributable to equity holders 2,561 1,766
================================ ===== ========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2017
Foreign Convertible Interest
Share exchange loan Share in
Ordinary premium translation note option Other Accumulated own
shares reserve reserve reserve reserve reserves losses shares Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
Balance
at 1 April
2015 7,236 37,014 (992) 42 296 12,320 (53,364) (24) 2,528
Share based
payments 22 22
Purchase
of own
shares (1) (1)
Transactions
with owners 21 21
Foreign
exchange
translation
adjustment 4 4
Loss for
the year (787) (787)
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
Total
comprehensive
income
for the
year (787) (787)
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
Balance
at 31 March
2016 7,236 37,014 (992) 42 317 12,320 (54,151) (20) 1,766
Share based
payments 11 11
Issue Costs (7) (7)
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
Profit
for the
year 791 791
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
Total
comprehensive
income
for the
year 791 791
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
Balance
at 31 March
2017 7,236 37,007 (992) 42 328 12,320 (53,360) (20) 2,561
=============== ========= ======== ============ ============ ======== ========= ============ ========= ======
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2017
2017 2016
Note $000 $000
====================================== ===== ======== ========
Cash flows from operating activities
Operating profit/(loss) for
the year 502 (1,103)
Depreciation 259 181
Amortisation and impairment 1,008 1,078
Share based payments 11 21
Purchase of own shares - -
Disposal of property, plant
and equipment 1 -
Changes in working capital:
Increases in trade and other
receivables (1,222) (613)
Increases in trade and other
payables 949 65
====================================== ===== ======== ========
Cash flow from operations 1,508 (371)
Tax received 256 669
====================================== ===== ======== ========
Net cash inflow from operating
activities 1,764 298
====================================== ===== ======== ========
Investing activities
Purchase of intangible assets (541) (493)
Purchase of property, plant
and equipment 4 (168) (32)
====================================== ===== ======== ========
Net cash outflow from investing
activities (709) (525)
====================================== ===== ======== ========
Cash flows from financing activities
Repayment of borrowings (164) (145)
Proceeds from borrowings - 710
Finance cost (591) (349)
Share and convertible loan
issue costs (7)
Net cash (out)/inflow from
financing (762) 216
====================================== ===== ======== ========
Net increase/(decrease) in
cash and cash equivalents 293 (11)
====================================== ===== ======== ========
Cash and cash equivalents at
the beginning of the year 314 325
====================================== ===== ======== ========
Cash and cash equivalents at
the end of the year 4 607 314
====================================== ===== ======== ========
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2017
1. 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, publishing 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
AIM Market of the London Stock Exchange and is incorporated and
domiciled in the UK. The address of the registered office is 7(th)
Floor, City Gate, 8 St Mary's Gate, Sheffield.
The registered number of the company is 03858881.
The consolidated financial statements are presented in US
dollars, the currency of the primary economic environment in which
the company operates.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been applied consistently to all the years presented, unless
otherwise stated.
2.1 Basis of preparation
These financial statements have been prepared in accordance with
IFRS as adopted by the European Union, and with those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that effect the application of policies and reported amounts in the
financial statements.
A separate Statement of Comprehensive Income for the parent
company has not been presented as permitted by section 408 (2) of
the Companies Act 2006.
The directors have prepared trading and cash flow forecasts for
the Group for the period to 31 March 2020 which show a continuation
of the growth in profitability. In line with industry practice in
this sector the directors have had informal indications from major
and smaller clients to substantiate a significant proportion of the
forecast sales. The directors have considered the consequences if
the sales volume is less than the level forecast and they are
confident that in this eventuality, alternative steps could be
taken to ensure that the Group has access to sufficient funding to
continue to operate. The Group has invoice financing arrangements
in place for sales made by both the UK and US subsidiaries. The
facility with Crestmark Bank provides invoice financing of up to
$2.5m against US clients invoices raised by ZOO Digital Production
LLC. This facility is in place until 7 July 2018. The facility with
Santander Bank provides an invoice financing facility for certain
sales invoices raised by ZOO Digital Limited. The maximum facility
is GBP500,000 and it is committed until February 2018. Both
facilities have the option to continue for an additional year.
The convertible unsecured loan notes totalling GBP3.1m were due
to mature on 31 October 2017. This liability has been shown on the
Consolidated Statement of Financial Position as a current liability
but on 4 May 2017 it was agreed that GBP0.5m of this loan be
converted into equity and the remaining GBP2.6m be extended to
mature on 31 October 2020. The US dollar value of the GBP3.1m loan
notes at 31 March 2017 was $3.8m (2016: $4.3m).
On 13 December 2013 Sara Green, the wife of Dr. Stuart A Green,
CEO of the company, provided financial support to the company with
a loan of GBP0.6m. The full amount of this loan remained
outstanding at 31 March 2017 but on 4 May 2017 the full amount was
converted into equity. The US dollar value of the loan at 31 March
2017 was $0.8m (2016: $0.9m).
On 4 May 2017 the directors announced a successful equity
placing which resulted in the receipt of GBP2.6m cash. This equates
to $3.3m at the exchange rate on the date of the transaction.
The directors believe the assumptions used in preparing the
trading and cash flow forecasts to be realistic, and consequently
that the Group will continue in operational existence for the
foreseeable future. The financial statements have therefore been
prepared on a going concern basis.
New and revised standards that are effective for annual periods
beginning on or after 1 April 2017
A number of new and revised standards are effective for annual
periods beginning on or after 1 April 2017. Information on these
new standards is presented below.
IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28
IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint
Arrangements', IFRS 12 'Disclosure of Interests in Other Entities',
IAS 27 (Revised) 'Separate Financial Statements' and IAS 28
(Revised) 'Investments in Associates and Joint Ventures' form a
comprehensive package dealing with group issues and off-balance
sheet activity.
In order to determine whether a reporting entity has control
over another entity in which it has invested, the following three
elements must always be present:
- power over the investee
- exposure, or rights, to variable returns from its involvement
with the investee
- the ability to use its power over the investee to affect the
amount of the investor's returns.
- a joint operation is a joint arrangement whereby the parties
that have joint control of the arrangement (ie joint operators)
have rights to the assets, and obligations for the liabilities,
relating to the arrangement.
- a joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement (ie joint ventures) have
rights to the net assets of the arrangement.
IFRS 12 establishes disclosure objectives according to which an
entity discloses:
- significant judgements and assumptions (and changes) made by
the reporting entity in determining whether it controls another
entity
- the interest that the non-controlling interests have in the
Group's activities
- the effect of restrictions on the reporting entity's ability
to access and use assets or settle liabilities of consolidated
entities
- the nature of, and changes in, the risks associated with the
reporting entity's interests in consolidated structured entities,
joint arrangements, associates and unconsolidated structured
entities.
The changes made to IAS 27 (Revised) 'Separate Financial
Statements' and IAS 28 (Revised) 'Investments in Associates and
Joint Ventures' are consequential changes arising from the
publication of the new IFRSs. The main change is that IAS 27
(Revised) will now solely address separate financial statements,
the requirements for which are substantially unchanged from the
previous version of the Standard. The requirements on how to apply
equity accounting are unchanged from the previous version of the
Standard.
The application of IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28
applies prospectively for annual periods on or after 1 April 2017
and did not have a material impact on the financial statements.
2.1.1 Standards and interpretations in issue at 31 March 2017 but not yet effective
The following standards and interpretations of relevance to the
Group have been issued, but are not yet effective and have not been
adopted by the Group:
IFRS 15 Revenue from Contracts with Customers (effective 1
January 2017)
IFRS 9 Financial Instruments (effective 1 January 2018)
IFRS 16 Leases (effective 1 January 2019)
At the date of authorisation of these financial statements,
certain new standards, amendments and interpretations to existing
standards have been published by the IASB but are not yet
effective, and have not been adopted early by the Group
Management anticipates that all of the relevant pronouncements
will be adopted in the Group's accounting policies for the first
period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that
are expected to be relevant to the Group's financial statements is
provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on
the Group's financial statements.
The group have yet to finalise their assessment of the impact
that these standards and interpretations will have on the financial
statements.
Other standards and interpretations in issue but not yet
effective are not considered to have any relevance to the
Group.
2.2 Consolidation
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is obtained until the
date that control ceases.
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.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting regularly reviewed by the Group's chief
operating decision maker to make decisions about resource
allocation to the segments and to assess their performance.
2.4 Foreign currency translation
2.4.1 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 in
US dollars which is the company's functional and presentation
currency. The functional currency of the company's subsidiaries is
US dollars, therefore the majority of transactions between the
company and its subsidiaries and the company's revenue and
receivables are denominated in US dollars.
The US dollar/pound sterling exchange rate at 31 March 2017 was
0.799 (2016: 0.704).
3. Profit/(loss) per share
Earnings per share is calculated by dividing the profit/(loss)
attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the year.
Basic and
Diluted
2017 2016
$000 $000
Profit/(loss) for the financial year 791 (787)
======================================= ======= ========
2017 2016
Number Number
of shares of shares
Weighted average number of shares
for basic & diluted profit/(loss)
per share
======================================== =========== ===========
Basic 32,660,660 32,660,660
Effect of dilutive
potential ordinary
shares:
Convertible loan
note 6,396,876 5,654,867
Share options 3,632,845 3,518,763
Diluted 42,690,381 41,834,290
======================================== =========== ===========
The basic and diluted earnings per share are the same due to the
average share price during the period being lower than the
conversion price or exercise prices of the convertible loan note
and share options.
4. Notes to the cash flow statement
4.1 Significant non-cash transactions
During the year the Group acquired property, plant and equipment
and computer software with a cost of $900,000 (2016: $193,000) of
which $732,000 (2016: $161,000) was acquired by the means of
finance leases.
4.2 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances
with banks. Cash and cash equivalents included in the cash flow
statement comprise the following consolidated and parent company
statement of financial position amounts.
Group Company
2017 2016 2017 2016
$000 $000 $000 $000
--------------------------- ----- ----- ----- -----
Cash on hand and balances
with banks 607 314 57 47
--------------------------- ----- ----- ----- -----
The fair values of the cash and cash equivalents are considered
to be their book value.
5. Share capital and reserves
Called up share capital
2017 2016
$000 $000
======================================== ====== ======
Allotted, called-up and fully paid
32,660,660 (2064: 32,660,660) ordinary
shares of 15p each 7,236 7,236
======================================== ====== ======
Reconciliation of the number of shares
outstanding:
Opening balance and closing balance 32,660,660 32,660,660
---------------------------------------- ----------- -----------
During the year the Group purchased nil (2016: 23,152) of its
own shares through ZOO Employee Share Trust Limited. The total cost
of the purchase was $0 (2016: $2,000).
Reserves
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
--------------------- -----------------------------------------
Share premium Represents the amount subscribed
reserve for share capital in excess of
the nominal value.
Accumulated losses Cumulative net losses recognised
in profit or loss.
Foreign exchange Cumulative exchange differences
translation reserve resulting from translation of foreign
operations into the reporting currency.
Convertible loan Represents the equity element of
note reserve the Convertible loan note.
Share option reserve Cumulative cost of share options
issued to employees.
Share warrant Cumulative cost of share warrants
reserve issued to clients.
Other reserves Created as part of the reverse
takeover between Kazoo3D plc and
ZOO Media Corporation Ltd in 2001.
6. Borrowings
Group Company
2017 2016 2017 2016
$000 $000 $000 $000
Non-current
---------------------------- ------ ------ ----- ------
7.5% Unsecured convertible
loan note stock - 4,301 - 4,301
Connected person loan 751 901 751 901
Other bank borrowings 654 637 - -
Finance lease liabilities 721 303 219 9
---------------------------- ------ ------ ----- ------
2,126 6,142 970 5,211
---------------------------- ------ ------ ----- ------
Current
---------------------------- ------ ------ ------- -------
7.5% Unsecured convertible
loan note stock 3,821 - 3,821 -
Amounts owed to subsidiary
undertakings - - 9,701 9,701
Finance lease liabilities 281 142 49 4
---------------------------- ------ ------ ------- -------
4,102 142 13,571 9,705
---------------------------- ------ ------ ------- -------
Total borrowings 6,228 6,284 14,541 14,916
---------------------------- ------ ------ ------- -------
Since December 2015 the Group has had a total of GBP3,070,500 in
unsecured convertible loan notes in place. The loan notes pay a
coupon of 7.5% and were due to mature on 31 October 2017. The loan
stock holder is entitled, before the redemption date, to convert
all or part of the loan stock into fully paid ordinary shares on
the basis of 1 ordinary share for every GBP0.48 of principal amount
of loan stock. The US dollar value of the GBP3,070,500 loan notes
at 31 March 2017 was $3,821,000 (2016: $4,301,000).
Sebsequent to the year end, on 4 May 2017 GBP500,000 of the
convertible loan stock was converted into equity and the remaining
GBP2,570,500 had itsmaturity extended to 31 October 2020. The
coupon and conversion terms remain unchanged.
The restructured convertible loan stock has been accounted for
in accordance with IAS 39 (Financial instruments: Recognition and
measurement). The fair value of the convertible loan note is not
considered to be materially different to the carrying value.
The Group has an arrangement with Crestmark Bank to provide an
invoice financing facility of up to $2.5m against US client
invoices raised by ZOO Digital Production LLC. This facility will
be in place until 7 July 2018 with an option to extend. Interest is
payable on a monthly basis and is charged for each day on the
outstanding balance with an interest rate of 5% above the LIBOR
rate with a minimum interest rate of 5.25%. An administration fee
of 0.20% is due on the face value of each invoice submitted and a
discount fee of 0.15% for each 15 day period for any invoice
outstanding after a period of 30 days. The principle outstanding at
31 March 2017 was $640,000 (2016: $625,000). This funding is
secured against the US trade receivables of ZOO Digital Production
LLC.
The Group has an agreement in place with Santander Bank to
provide an invoice financing facility of up to GBP500,000 against
certain clients' invoices raised by ZOO Digital Limited. This is an
annually renewable facility. The Group can draw on funding from the
bank up to the lower of 75% of its applicable UK company trade
receivables and GBP500,000. The principle outstanding at 31 March
2017 was $14,000 (2016: $12,000). This funding is secured as a
floating charge over the assets of the UK companies.
On 13 December 2013 Sara Green, wife of Dr Stuart A Green, made
a loan to the company of GBP600,000 with an interest rate of 10%.
The full amount of this loan remained outstanding at 31 March 2017.
Subsequent to the year end, on 4 May 2017 the full amount was
converted into equity. The US dollar value of the loan at 31 March
2017 was $751,000 (2016: $901,000) This loan is secured as a
floating charge over the assets of the Group.
7. Post balance sheet event
On 18 April 2017 it was announced that the company proposed to
raise gross funds of approximately GBP2.58m ($3.33m) through a
placing and subscription comprising the issue of 28,611,111 new
ordinary shares at 9p per share. It was further announced that
12,222,223 share would be issued in return for the conversion of
the GBP600,000 outstanding loan from Sara Green, the wife of Dr
Stuart A Green, and the conversion of GBP500,000 of convertible
loan note and that the remaining GBP2.57m of convertible loan note
be extended to mature on 31 October 2020. This transaction was
approved in a shareholder meeting held on 4 May 2017.
Annual report and Accounts
Copies of the Report & Accounts for the year ended 31 March
2017 are available to view on the Group's website
www.zoodigital.com
The Report & Accounts for the year ended 31 March 2017,
together with the notice of annual general meeting, are expected to
be posted to shareholders during August 2017; an announcement to
notify shareholders of this will be made in due course. Further
copies will be available from the Company's Registered Office:
Floor 7, City Gate, 8 St Mary's Gate, Sheffield S1 4LW
Annual General Meeting
The Annual General Meeting of the Group will be held at ZOO's
offices on 26 September 2017 at 4pm.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FFMLTMBATBTR
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