Interim Results for the Six Months to 30 September 2012
Nov 21, 2012 (M2 PRESSWIRE via COMTEX) --
ZOO Digital Group plc, the provider of workflow management software and services for creative media production, today announces its financial results for the six months to 30 September 2012.
We are pleased to announce that ZOO has had a profitable start to the year, in contrast to the difficult first half of last year where we were affected by the volatility of the Home Entertainment market. Revenue has increased to $6.2 million (2011: $5.9 million) leading to an operating profit of $0.2 million (2011: $1.1 million loss). This improvement in profitability is the result of a diversification in revenue sources and a greater contribution from higher margin services and software licensing.
A significant proportion of ZOO's revenue comes from the supply of products and services for the Home Entertainment market, with customers including film and TV programme makers in Hollywood and elsewhere. For the past two years this market has been undergoing significant change due to a large number of factors, most notably the growth of on-demand electronic distribution services.
In the year to March 2012 the decline in the number of home entertainment products introduced into the market by ZOO's clients led to a reduction in revenues. This has subsequently stabilised, although market conditions continue to be difficult. According to the Digital Entertainment Group (DEG), consumer spending on home entertainment rose 0.24% in the third quarter of 2012 compared with prior year, made up of a decline in mature parts of the market, such as DVD-Video, offset by growth in new market areas including Electronic Sell Through (EST), Video on Demand (VOD) and Blu-ray Disc. We have experienced pricing pressures from established vendors in areas such as DVD services, and continue to observe consolidation in this market. ZOO's workflow tools are designed to work for all platforms and therefore any increase in the number of titles produced, irrespective of format, results in an increased throughput for ZOO. There has been particularly strong growth in EST and Blu-ray which, according to the DEG, have grown in the third quarter by 38% and 13% respectively.
During the first half of the year we introduced our cloud-based subtitle production system, ZOOsubs. We have signed up a number of customers who are now using this service to repurpose existing subtitles for new electronic delivery formats such as iTunes. Feedback has been positive and we anticipate adding further licensees from which we will generate recurring revenues as ZOOsubs is adopted for both conversion and origination of subtitle data.
We have continued to develop tailored workflow management solutions and have deployed several new systems in the period to groups involved in the production of creative media, including those working on feature films, TV series and electronic books. A large number of the new systems we have built and deployed have arisen through repeat business with satisfied clients who have sought to replicate the efficiency benefits through introduction in other parts of their operations.
Whilst we have secured further new clients in the eBook market and have now licensed our software to a number of the leading US book publishers, we have not yet seen the large participants in this market commit fully to eBook formats for their back catalogues of illustrated titles. Our ZOO eBook Builder software enables existing print source files to be repurposed quickly and easily for publishing on eReader devices, and we are well positioned to secure new business if leading publishers embrace electronic formats for their illustrated titles. However, until we see evidence of commitment to electronic illustrated titles, we must remain cautious about our expectations for the profit potential of this market.
We continue to invest in research and development to create new technologies that strengthen our product set and facilitate our scalable business model from which we generate recurring revenues as a result of strong customer and partner relationships. This is particularly true of our workflow management solutions that are priced on a per-user-per-month basis, and where enhanced functionality usually leads to greater adoption and therefore increased licensing income.
We remain cautious about volatility in the market. Our business may be disrupted by new entrants and new ways of doing business, and we are conscious of the potential for desperate actions by established vendors under threat. Overall, however, we believe that this disruption should be positive for us as clients seek to de-risk their businesses by taking greater control over the production process, which our systems enable. It is our belief that the benefits our systems deliver will become increasingly attractive across multiple segments of the creative industries. We go into the second half with a broader product set and many opportunities to diversify our customer base and we remain cautiously optimistic.
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