ZOO Digital Group Plc (AIM:ZOO), the supplier of cloud software to the media industry, sank around 22% on Thursday after it revealed revenues were expected to come in lower than analysts had initially expected.
Writers' strikes in Hollywood have plagued the entertainment industry in 2023 and ZOO Digital has experienced it first hand, with the reduced demand for media services leaving the group’s first-half revenues at around US$21 million, less than half that of the US$51.4 million posted in the 2023 financial year.
Underlying profits are expected to slump to a “significant EBITDA loss,” swinging from a profit of US$7.3 million the year prior, chairman Gillian Wilmot revealed in a company statement.
Although a deal between the Writers Guild of America (WGA) and the Association of Motion Pictures and Television Producers (AMPTP) is likely to be reached soon, the London-listed stock had accounted for normal levels to resume by October, which is now very unlikely to happen.
Therefore, ZOO Digital is expecting revenues to remain at similar levels to the first half, with the chance for a slight sales bump in the fourth quarter should production in Hollywood resume.
Wilmot added: “The board has taken steps to mitigate ZOO's position through the implementation of cost reductions with the objective of achieving break-even in respect of fiscal Q4.
“ZOO continues to make good progress in cementing its relationships with existing and potential new customers even during this period of temporary disruption.
"The board will manage ZOO's cash position carefully whilst protecting production capability and capacity to enable a rapid rebound of revenues when orders return.”
ZOO Digital is down over 77% in the current year, having opened trading on Thursday at around 30p.