Zoo Digital (ZOO) reported significant revenue growth in the first half, buoyed by its increasing focus on proprietary localisation services for the entertainment industry and subtitling, as well as initial projects on new dubbing platform 'ZOOdubs'. However, dubbing also incurred exceptional costs, dragging down gross margins from 75 per cent to 63 per cent.
As ZOOdubs develops, it's expected to become more efficient. Management says there is enormous interest in this service, which allows voice actors to work remotely using software for guidance. Elsewhere, ZOOsubs – the subtitling business – has helped reduce earnings seasonality while driving top-line growth. The group now employs nearly 3,000 freelance translators. Encouragingly, the group's largest customer now contributes 28 per cent of revenues – down from 47 per cent – implying improved client concentration and revenue diversification.
As for the balance sheet, a placing in April generated £2.6m in cash with a view to improving organic growth, while also capitalising £1.1m of debt. Over the six months, net debt fell to $3.9m (£3.0m) from $6.2m.
Analysts at FinnCap forecast adjusted pre-tax profits of $0.2m for the year to March 2018, up from a pre-tax loss of £0.1m in 2017. EPS is expected to stay flat at 0.5¢.
| ZOO DIGITAL (ZOO) | ||||
| ORD PRICE: | 52p | MARKET VALUE: | £38.2m | |
| TOUCH: | 51-53p | 12-MONTH HIGH: | 69p | LOW: 8p |
| DIVIDEND YIELD: | nil | PE RATIO: | 142 | |
| NET ASSET VALUE: | 10¢* | NET DEBT: | 53% | |
| Half-year to 30 Sep | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2016 | 7.8 | 0.42 | 2.1 | nil |
| 2017 | 12.7 | -0.14 | 0.1 | nil |
| % change | +63 | - | -94 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of $6.7m, or 9.1¢ a share £1=$1.31 | ||||
