Shares in Zoo Digital (ZOO) plunged nearly 50 per cent after the company warned that adjusted cash profits for the year to March 2019 would be “significantly below expectations”. Management blamed the loss of a material localisation project during the second half, which was scheduled to begin and end during the period. Meanwhile, revenues associated with processing legacy DVD and Blu-ray titles in the that same period will be “significantly lower” than expected, because of the accelerated decline of this market.
Revenues in the second half will be flat on the first six months of the year and therefore around 10 per cent below full-year expectations. However, cash balances are expected to sit broadly in line with the prior year.
These are unsurprisingly volatile times for highly-rated, lossmaking stocks. Zoo arguably needed to outperform market expectations in order to garner a positive share price reaction. House broker finnCap has reduced its revenue and adjusted pre-tax profits estimates for FY2019 from £33.7m to £30m. It now anticipates adjusted pre-tax losses of £0.64m, rather than profits of £1.75m.
