ZOO Digital Group plc, the provider of subtitling and digital distribution services for the global entertainment industry, today announces an update on trading for the financial year ended 31 March 2016.

The Company is pleased to report that revenue for the year is expected to be approximately $11.6m (2015: $11.5m). As previously announced, the Company suffered disruption to its business caused by the acquisition of one of its largest customers. This customer contributed 24% of the Company’s revenues in the year to March 2015; growth from new clients in the period to March 2016 has fully offset this shortfall.

The Company expects to report EBITDA of approximately $0.2m (2015: EBITDA loss of $0.7m). Gross margin remained strong at 79% (2015: 78%).

The new convertible loan note of £500,000 raised in December 2015 has provided additional working capital to support the on-going development of the business which, during the year to March 2016, has seen customer numbers swell by 29%.

The entertainment industry continues to evolve rapidly with online retailers, such as Apple, Netflix, Amazon, Google and Hulu, playing an increasingly significant role. According to the Digital Entertainment Group, overall electronic sell-through (EST) spending rose 18% in calendar 2015. Research from Adobe and The Diffusion Group indicates that consumers are now spending 42% of their TV viewing time watching streaming video services. ZOO continues to build on its relationships with leading online retailers, and in February 2016 was approved by Apple to offer iTunes aggregation services for TV series, in further recognition of its consistent delivery of outstanding quality content to the iTunes store.

The Company has continued to invest in its cloud computing platforms, including ZOOcore and ZOOsubs, which are increasingly sought in the market to enable quality TV and movie content to be delivered in more languages to many online retailers more quickly, reliably and at higher quality. ZOOsubs, which is being adopted as the subtitle system of record by a growing number of ZOO’s clients, recently passed the milestone of 100 million subtitles stored for leading content producers.

To capitalise on the growth market, ZOO has expanded its commercial team through two key appointments. Syed Ahmed has joined to focus on international business development, opening up opportunities for customers in the Middle East, South Asia and Asia Pacific. Syed previously held the position of Managing Director for the Middle East with Deluxe. European sales will also be expanded following the appointment of Mazin Al-Jumaili who joins as Director of Business Development for Europe. Mazin was previously VP Localisation Europe at Deluxe and most recently Managing Director UK at BTI Studios.

In response to client demand, ZOO has introduced a number of new products and services in the period:

  • The first is a subtitling service for TV advertising – an area of growth as legislation around the world increasingly requires broadcasters to make more programmes accessible to viewers with disabilities.
  • Using services enabled through its cloud technology, ZOO is now able to improve significantly the discoverability of video materials on the internet by the preparation of contextual information that reveals what is happening in each scene. Although currently in its infancy, we expect this enriched metadata will become increasingly important to online retailers.
  • To assist in the management of media assets for delivery to the growing number of digital platforms, the Company has developed ZOOvault to provide secure cloud storage and simplify ordering of new languages and formats.
  • At the North American Broadcasters (NAB) show in Las Vegas in April the Company unveiled ZOOscreen – a new digital service to deliver screeners (viewing copies) for Academy Awards and other film festivals. Currently screeners are distributed on DVD; ZOOscreen provides a higher quality, more economical and secure way to deliver content to Academy Members and other recipients. NAB 2016 has been the Company’s best ever tradeshow in terms of visitors and meetings.

The ongoing changes in the industry are the result of demand for wider availability of entertainment content around the world, delivered in more languages by more online retailers. This calls for a new breed of service provider, offering more agile and efficient services. Through its development and use of innovative cloud technology, ZOO is uniquely placed to capitalise on the growing market opportunity. Despite continuing flux within the industry, ZOO is now securing traction from content owners and online retailers, resulting in greater diversification of the client base, reduced client concentration and a stronger sales pipeline.

Stuart Green, Chief Executive Officer of the Company, commented: “We are entering our 2017 year with a stronger pipeline, a broader range of services and greater sales capability than ever before. The board is increasingly optimistic about the Company’s potential for growth.”