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ZOO Digital Group provides software and related services that support the authoring, re-purposing and distribution of creative media. ZOO’s products form an integrated suite of web-based and desktop applications for audio/visual content and printed materials, adapting these media for different languages, formats and delivery...Read more
UPDATE - ZOO Digital's second half highlights recovery potential says brokerJuly 11 2012, 1:28pm
ZOO was caught out last year by a rapid collapse in the DVD market, but has regrouped around e-books and adapting films and TV programmes for new media formats such as Blu-ray.
Revenues for the year to March came in at US$11.2 mln against US$13.8 mln, while operating losses were US$1 mln compared with a US$1.1 mln loss in the first half.
Finncap expects revenues to recover further to US$14 mln in the current year, with the group swinging back into adjusted profits of US$700,000.
The group made a pre-tax loss of US$2mln after heavy financing costs following a convertible issue.
DVD volumes stabilised in the second half said chief executive Stuart Green, which helped the firm return to the black at the operating level.
The proportion of titles adapted using ZOO's workflow systems has also increased since the year end despite a steep fall in the overall volumes from 12 - 18 months ago.
A greater emphasis on adapting titles for Blu-ray, particularly with back catalogues, added extra impetus, Green added.
“The improvement that we saw in the second half of the year has continued into the current financial year and we believe that we have a better diversity and suite of products than at any time previously. “
“Whilst we enter the new year with confidence we remain alert to general conditions,” he said.
Elsewhere, the company’s e-book tool that adapts specialist books to go online is gaining traction.
ZOO’s tool is not aimed at the paperback bestsellers, but at complex, highly illustrated and interactive books such as for children.
The company believes it is only a matter of time before there is “step change” in the amount publishers commit to the e-book format.
The firm is also hopeful its Apple iTunes-focused electronic sell through tool (EST) will build on its current “steady” sales as the use from iPads and iPhones, rather than just desktops, picks up.
ZOO also has high hopes for a cloud-based tool that allows the preparation and adaptation of subtitles across all platforms such as DVD, Blu-ray, EST and broadcast.
Chairman Roger Jeynes says dubbing and subtitling is a huge market, most of which is currently carried out manually with each language being burnt into a video stream.
He says ZOO’s tool splits out the subtitling from the video and can be handled automatically.
Finncap was encouraged by the increase in the spread of customers in the second half, with the proportion of revenue handled by its main customer falling and the total number of clients rising from 37 to 69.
“With growth in customer numbers, the opportunity for growth in spend per product per customer and an expanded product set, ZOO has a credible path which presents a sense of optimism absent at interims,” said the broker.
If it can deliver on forecasts, there is the opportunity for the ZOO share price to increase significantly, finnCap added.
It has 50 pence target price. The shares rose 5 per cent to 11 pence today.