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ZOO Digital www.zoodigital.com/
Full ZOO Digital profile here

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 mechanisms.

ZOO’s services enable quicker and more cost effective processes across a wide range of applications and formats, including packaging, printed materials, DVD, Blu-ray Disc, video on demand, electronic sell-through, broadcast, music and electronic books.

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ZOO Digital shares soar as it bounces back to profit in second half

Media firm ZOO Digital’s (LON:ZOO) boss is upbeat about the company's prospects, notably its e-book business, after a bounce back into profit in the second half of the year.

In the first half, the firm had been developing its e-book offerings but now had started to secure growing amounts business, chief executive Stuart Green said.

Investors welcomed today's statement sending its shares surging by 20 per cent.

Underlying earnings at the company, which supplies software to the creative media and makes DVDs, came in at US$1 million and operating profits were US$0.2 mln in the six months to March 31.

That compared to a loss of US$0.4 mln and a loss of US$0.9 mln in the first six months (to September 30) when DVD sales collapsed.

Green said the second half's improved performance was down to an increased demand for Blu-ray and, notably, that revenues were now beginning to come through from the firm's e-Book activites.

He also told Proactive that the DVD market had now stabilised and cost reductions made by the company had also played a part in the trading improvement.

He was particularly optimistic about the e-Book industry, which has rapidly developed in recent years, but largely focused on converting conventional novels into electronic versions.

As well as converting word-based formats, Green said ZOO Digital's e-Book technology could help publishers to convert more complicated versions such as childrens' books, travel guides (which have pictures) and interactive books with moving images or sound.

Such technology allows publishers to produce premium, enhanced products, which command a higher price tag, pointed out Green.

"I think it's a very exciting market," he said, adding that he believed that there would be consumer demand, but it was early days.

"If publishers can really tap into that and embrace the format (electronic), then I think we are very well placed to capitalise," he said.

The group's largest customers include major Hollywood studios, for which the firm offers services such as DVD production, video editing services, and voice-over recording.

Green said its "bread and butter" business was still with large entertainment companies, such as those in Hollywood.

Another boost to second half earnings was the increase in Blu-ray production, Green told Proactive.

"Studios have recognised now that they really need to get their back catalogue out on Blu-ray," he said.

Across the industry, Blu-ray has now replaced traditional DVDs  for video-based entertainment.

Blu-ray discs enable recording and rewriting of high definition video and can store large amounts of data.

Sales in DVDs plummeted last year - largely as consumers turned to the rental market, rather than buying them.

The decline hit the television series box set segment of the DVD market particularly hard, as with as many as eight DVD discs to a series, the products were not suited to the DVD rental market.

Because of the better second half, Zoo now expects full year underlying earnings of US$0.6 million (2011: US$2.5 million) and an operating loss of US$0.8 million (2011: operating profit of US$1.5 million).

In this morning's statement, Green had said: "We are pleased to report a stronger second half of the financial year.

"2011 was a very difficult year for the home entertainment industry due to the significant changes that have taken place in consumer markets.

The innovation and diversification within our business has helped ZOO to broaden its offering into complementary markets and we believe that the business is in a strong position to take advantage of growth in a number of areas."

The company had a gross cash balance of US$1.2 million at the end March.

As at 3pm, ZOO Digital shares were up 20.51 per cent, to stand at 11.75 pence.

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