ZOO Digital Group plc
Annual Report 2021
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ZOO Digital Group plc
Annual Report 2021
2 Key performance indicators
2
3 Welcome
3
5 Who we are
4
6 Our year in review
6
8 What we do
8
12 Who we do it for
12
14
14
Industry challenges and ZOO solutions
16 Strategy for sustainable growth
16
18 Building a responsible, future-focused business
18
20 Why invest in ZOO?
20
00 Chairman’s statement
22
00 Strategic report
23
00
29
Financial review
00 Corporate governance statement
32
00 Advisors
42
00 Directors’ report
43
00 Directors’ remuneration report
45
00
49
Independent auditor’s report
00 Consolidated statement of comprehensive income
57
00 Consolidated statement of financial position
58
00
59
Company statement of financial position
00 Consolidated statement of changes in equity
60
00
61
Company statement of changes in equity
00 Consolidated statement of cash flows
62
00
63
Company statement of cash flows
00 Notes to the financial statements
64
00 Group directory
97
Key performance
indicators
Financial
Revenue
$39.5 million
(FY20: $29.8 million)
EBITDA margin1
11.5%
(FY20: 7.0%)
Operational
Operating expenses as
a % of revenue
32%
(FY20: 36%)
Number of freelancers2
9,207
(FY20: 7,184)
Retained Sales3
98.5%
(FY20: 97.0%)
1 Adjusted for share-based payments
2
The number of active freelance workers in ZOO’s systems who are
engaged directly
3 Proportion of customer revenues retained from one year to the next
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WELCOME TO OUR
ANNUAL REPORT
FOR 2021
In a year when the world stayed at home and
watched more TV, ZOO worked from home to
deliver more content, to more audiences than
ever before.
Having ended the year with a strong revenue
increase of 33%, we are confident of our
enduring growth prospects.
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ZOO Digital Group plc
Annual Report 2021
WHO WE ARE
ZOO Digital is a leading provider of cloud-based
localisation and media services to the global
entertainment industry.
Our services, solutions and technologies support
major Hollywood studios and streaming services
to globalise their new and catalogue content for
audiences around the world – in all languages and
for all streaming platforms.
OUR TEAMS
ZOO Digital
Labs
Content
Localisation
Media
Services
Our experienced in-house
R&D team creates the
industry-leading software
tools that make our services
smarter and our customers’
lives easier.
Our localisation teams
manage the creation of
localised content in different
languages to share movies
and TV shows with streaming
audiences around the world.
Our media services teams
package and deliver
technically-compliant
digital content to streaming
platforms in all territories.
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ZOO AT A
GLANCE
4 post-production
facilities
in Los Angeles, London,
Dubai and Sheffield
Distributed
workforce in
59 countries
309 ZOO staff
24-hour follow-the-sun
service coverage
39 in-house
R&D specialists
20-year track
record of
innovation
83 languages
offered as part of
ZOO’s localisation
services
9,207 freelance
translators, actors,
directors, adapters
and mixers
Increased revenues
at a compound
annual growth rate
of 27% over the past
five years
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Global ZOO team
grows by 35%
to accommodate increased
demand for services and
technology
OUR YEAR IN REVIEW
ZOO enhances the calibre of its
audio post-production services
with the appointment of
Emmy™ award winner,
Dave Concors, as
Head of Sound
£7.4 million
($10.3 million)
raised through an
oversubscribed placing to
invest for growth and maintain
leading industry position
ZOO strengthens its
in-house teams for
R&D, media services,
audio description
and mastering
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Remote ADR service
and virtual ADR
stages are launched
to support content
creators
Territory managers
are appointed
to bolster ZOO’s
dubbing expertise
across key markets
in Europe, Middle
East and Asia
ZOO is awarded the
Broadcast Tech Innovation
Award for ‘Excellence in
Localisation For a Global TV
Project’ for the second year
in a row
Pandemic accelerates
adoption of remote/
cloud dubbing across
the industry
ZOO commits to
a hybrid working
model for the post-
pandemic future
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ZOO Digital Group plc
Annual Report 2021
WHAT WE DO
ZOO provides content creators with the
end-to-end services needed to globalise
TV and movie content.
Our localisation services adapt original content for
different languages, regions and cultures. Our media
services ensure content is technically compliant
for all required distribution platforms. Through
globalisation, content creators can extend the reach
and financial opportunities for their new and existing
entertainment content.
Content
Language versions
Media services
Delivery to platforms worldwide
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ZOO’s localisation services include:
Subtitling: Textual, on-screen translation of the dialogue in other languages
Dubbing: Audio adaptation of the dialogue in other languages
Captioning: Textual, on-screen representation of the dialogue and
other sounds for the deaf and hard of hearing
Audio description: Spoken narration of on-screen visual content
for the visually-impaired
ZOO’s media services include:
Content preparation: Preparing source video and audio content
to the correct technical formats for a digital distribution platform
Content packaging: Combining all video, audio, graphics, metadata
and localisation assets in a digital delivery package
Content QC: Ensuring delivery packages are compliant with the
content and technical specifications of the target streaming platform
Content delivery: Delivering packaged content to end-point
streaming platforms around the world
Metadata preparation: Preparing compliant metadata, including the
synopsis and information about the cast and crew, for a digital
delivery package
Asset health check service: Reviewing customers’ existing assets,
creating missing components, and consolidating reliable assets in
customer systems
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ZOO Digital Group plc
Annual Report 2021
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HOW WE DO IT
ZOO has created an interconnected ecosystem
of cloud-based production and management
software platforms. The proprietary platforms
support efficiency, quality and security across
all ZOO services.
Cost-effective, scalable servicing capacity is achieved
by working collaboratively with a global network of
independent dubbing studios, translation partners
and a freelancer community around the world. This
global workforce collaborates as one in our cloud-
based platforms, with security and quality standards
enforced by ZOO technologies. We identified this
as the most effective approach to respond to the
growing challenges of today’s entertainment industry;
challenges that have been further compounded by
the global pandemic.
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ZOO Digital Group plc
Annual Report 2021
WHO WE DO IT FOR
ZOO operates as part of the
rapidly expanding global media and
entertainment industry.
Our customers are the world’s biggest
content creators that distribute TV shows
and movies to vast multi-lingual audiences
via global streaming services.
OUR CUSTOMERS
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A BOOMING INDUSTRY
IN NUMBERS
More viewers. More content. More languages.
More platforms. More opportunities.
Over 200 TV and movie
streaming services worldwide4
Streaming video-on-demand
(SVOD) revenues for 138
countries will reach $100 billion
by 20255
SVOD subscriptions to reach
1.5 billion by 20266
$121 billion estimated annual
spend on original content7
Disney predicted to lead original
content spend in 2021 with a
total of $30.5 billion; £13.2 billion
for their D2C and International
segment8
Global media localisation spend
is an estimated $2.27 billion9
Netflix currently provides
localised content in 30 languages
across 190 countries10;
Disney+ offers 27 languages
in 59 countries11
4 https://flixed.io/complete-list-streaming-services-2021/
5 Source: Digital TV Research
6 Source: Digital TV Research
7 Source: Variety Intelligence Platform
8 Source: Variety Intelligence Platform
9 Source: Slator 2021 Language Industry Market Report
10 Source: https://about.netflix.com/en
11 Source: https://dmedmedia.disney.com/about-disney-plus
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ZOO Digital Group plc
Annual Report 2021
INDUSTRY
CHALLENGES AND
ZOO SOLUTIONS
Content creators face unprecedented challenges as they launch
new platforms and distribute content to new audiences around the
world. In ZOO, they have a partner with a purpose to make their lives
easier. We work alongside them to address their current challenges
and anticipate their future needs.
SPEED
Customer challenge:
ZOO solution:
Time to market must be
reduced to hit simultaneous
global ‘day-and-date’ release
schedules.
Our software platforms use assistive technologies
and automation to make localisation and media
services more efficient, working effectively from
early preliminary versions of video content.
SECURITY
Customer challenge:
ZOO solution:
The value of content must be
protected by ensuring that access
to it is rigorously controlled during
the localisation workflow
Our software ensures watertight security
through robust content protection measures,
significantly reducing any vulnerabilities in
the workflow.
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QUALITY
Customer challenge:
ZOO solution:
Global audiences demand a
high-quality experience of their
favourite shows and movies with
authentic dubbing and true-to-
original subtitling.
The focus on delivering superior quality extends
across all ZOO services and software platforms
through the engagement of experienced talent,
and by combining both automated and human-
led QC processes.
DIVERSITY
Customer challenge:
ZOO solution:
Access is needed to a more
diverse and representative voice
actor community in order to
create authentic local versions,
accurately reflecting the original
on-screen characters.
Our collaborative, platform-based dubbing
model allows us to cast from a wider global
pool – offering more regionally-, culturally- and
gender-diverse voices that are aligned with
customers’ content.
VOLUME
Customer challenge:
ZOO solution:
More content production and
the repurposing of vast content
archives means a greater volume of
content globalisation projects for the
customer to manage, with limited
additional internal resource to do so.
Our servicing model and production platforms
are specifically designed for globalisation at
scale. We partner with our customers and provide
management platforms to help their in-house
teams to successfully manage localisation and
media services.
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ZOO Digital Group plc
Annual Report 2021
GROWTH
STRATEGY
ZOO understands the current and
future needs of the industry.
Our strategy for long-term, sustainable growth is
driven by foresight and agility. Foresight to recognise
immediate and future challenges in the industry. Agility
to swiftly align the business to successfully address
them. This is expressed in the following pillars:
INNOVATION
Deliver significant competitive
advantage by making operations
more efficient, ensuring
consistently high quality, and
developing service capabilities
specific to the needs of
customers and the market.
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SCALABILITY
For creative and skilled roles, our
team will identify, recruit, train
and engage freelance workers
for a cost-efficient, flexible and
scalable resource across all
required languages.
CUSTOMERS
Work with the leading global
buyers of OTT subtitling,
dubbing and media services in
order to establish ZOO as
a preferred partner.
COLLABORATION
Appoint qualified partners and
provide access to ZOO software
to establish a presence in key
countries, particularly emerging
markets
TALENT
Attract, develop and engage
staff to grow capability and
capacity through talented and
experienced individuals across
all functions.
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ZOO Digital Group plc
Annual Report 2021
BUILDING A
RESPONSIBLE,
FUTURE-
FOCUSED
BUSINESS
ZOO is committed to building a responsible, future-focused
business. Always looking forward, to ensure that we and our
services are built for tomorrow as well as today.
Our team is dedicated to delivering innovation,
education and opportunities for all.
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Education
Our ZOO Academy initiatives are
educating the global workforce of the
future. Talented translators, adapters,
actors and directors are in short
supply. Through training qualifications,
academic collaborations and free-to-
access deployment of ZOO software
platforms, we are helping the next
generation to learn their craft in a
reliable, relevant and sustainable way.
Diversity and
Inclusion
To address the challenge of sourcing
representative voice actors for
diverse on-screen characters,
ZOO is building a far-reaching
voice actor community, capable
of authentically representing
characters of all ethnicities, cultures
and gender identities.
Technological
Innovation
The ZOO Digital Labs
innovation centre is researching
and developing the tools and
technologies of the future;
innovations that empower us to
offer smarter, easier and better
solutions to our customers for
years to come.
Environmental
ZOO will continue to maintain its
low carbon footprint and build a
responsible business through the
use of cloud-based technology
that enables work to be done
without the need to travel to a
specific central location and with
fewer global offices.
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WHY INVEST
IN ZOO?
Investment
summary
at a glance
Large, growing
global market
$1.3 billion estimated annual
addressable market12
Significant year-on-year
revenue growth
33% revenue growth in FY21
Continued investment
in innovation
$1.6 million investment in R&D in FY21
Market-leading position
Top 35 leader in the global Language
Services Provider (LSP) index13
Fully supported remote
capabilities
100% remote workforce during pandemic
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Strategically aligned with the world’s biggest
content creators and streaming services,
ZOO addresses their current needs and
anticipates future challenges better than
anyone else in the sector.
This customer-focused approach to services, solutions and
technologies will continue to deliver sustainable, profitable
revenue growth. The business is well placed to meet its
$100m sales target in the medium term.
Distributed global
supply chain
Network of over 9,200 translators, voice
actors, adapters, directors and mixers
Scalability via
international partner
network
Over 230 onboarded partner
studios and vendors
Trusted customer
partnerships
98.5% retained sales in FY21
Experienced senior
leadership team
10-year average length of service
in senior team
Highly engaged, growing
global workforce
35% growth in FY21; workforce
engagement at 81%14
Well-funded for growth
£7.4 million ($10.3 million) raised in
April 2021 placing
12 Company estimate 13 Slator LSP Index 2021 14 Independently measured by an Edgecumbe survey in January 2021
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Chairman’s Statement
I am pleased to report an excellent year for ZOO Digital, which has delivered strong growth throughout a period of significant
disruption to the entertainment industry caused by the COVID-19 pandemic.
For several years the entertainment market has been undergoing a structural shift and we have seen this accelerate markedly over
the last 12 months. The industry continues to be reshaped by the unrelenting rise in streaming video through which internationally
sourced content is becoming accessible to consumers globally.
ZOO’s role is pivotal, providing the essential services needed by the industry to take completed TV series or feature films and
create the materials necessary for content to playout on streaming platforms in any language. ZOO operates as a one-stop-shop,
delivering services powered by its proprietary cloud technology that has provided resilience during the pandemic.
ZOO has been able to operate as normal during the past year, despite the disruption to the wider industry. In a market segment
that has shrunk slightly over the period, ZOO has delivered strong growth. Revenues are up by 33% over the prior year to $39.5
million, and adjusted EBITDA has increased 112% to $4.5 million.
For major media companies, business is becoming increasingly challenging due to the decline in traditional revenue sources of
the box office and PayTV licensing, the launch of direct-to-consumer services, enlarged production programmes and expansion
of streaming services globally. At ZOO, our mission is to make life easier for the people who entertain the world and be our
customers’ most trusted partner to deliver engaging, entertaining, and immersive content experiences to global audiences.
During a period when market commentator Slator* reported that media localisation market sales declined slightly, our strong
growth implies that we have grown our market share. With the backdrop of the temporary halting of new title productions during
the pandemic, we have proven ourselves to be reliable, adaptable, and capable of meeting all our customers’ requirements. Our
competitive advantage is particularly strong with global platform customers that have adopted our software solutions to manage
their streaming production operations and enjoy significant productivity benefits as a result.
In April 2021, we completed a £7.4 million (approximately $10.3 million) fundraise to enable us to fully capitalise on the excellent
opportunities available to us. This will allow us to accommodate an expanding order book, continue to deliver strong growth and
boost our R&D capabilities to further build on our leading position in the market.
I would like to welcome the new shareholders who joined our register in the recent placing, and to thank all our investors and
stakeholders for the support they have shown over the past year. In addition, I am grateful to the holders of ZOO’s convertible
unsecured loan stock, most of whom have continued their support since this was issued in 2007 and have since agreed to
several extensions. With the instrument reaching the end of its term in October 2021, we look forward to redeeming the capital or
converting the loan stock to equity at the option of individual holders.
There have been many obstacles to navigate over the past year, yet our people have performed magnificently, rising to every
challenge that has been thrown at them. I would like to extend my gratitude not only to those employed by ZOO, but also to our
growing community of over 9,000 freelance workers and over 200 partner studios and vendors who are crucial to delivering the
high-quality services we offer. Today’s results would not have been possible without their ongoing support and hard work. Thank
you all.
With an expanding market and excellent customer relationships, the Board remains confident of continuing growth for the years
ahead.
Gillian Wilmot
Chairman
ZOO Digital Group plc
*https://slator.com/data-research/slator-2021-language-industry-market-report/
ZOO Digital Group plc Annual Report 2021 Strategic Report
Page 23
Introduction
Our strategic report covers an extraordinary period for almost every business across all sectors around the world. There are
few markets that have been unaffected by the global pandemic, and entertainment is certainly no exception. The suspension
in production of feature films and TV series has had a detrimental effect on businesses that operate in production and post-
production. The demand for media localisation in our sector is greatest in relation to newly produced titles and consequently the
pandemic has had a big impact particularly on traditional dubbing businesses in its early months.
Despite this, ZOO has delivered strong growth of 33% year on year, fuelled by the expansion of its media services segment, and
continued to play a leading role in the digital transformation of the sector. This is a testament to the Group’s strategy, built on its
proprietary technology and operational differentiators that have enabled it to adapt to the changing requirements of customers,
and to the trusted status of the Company as a preferred vendor to six leading content producers and streaming platforms.
Market Overview
Changes to industry dynamics accelerated during 2020
Streaming video through Over-the-Top (OTT) delivery is now central to the strategy of every major media company across the
entertainment industry. During the pandemic, major publishers including Disney, WarnerMedia and NBC Universal have pursued
Premium Video on Demand (PVOD) offerings where new movies are shown on streaming services first. Netflix, Amazon and
Disney+ have all reported significant growth in subscribers to their streaming services during the last year as the platforms are
increasingly adopted.
This rise in streaming services has further accelerated the decline in the PayTV market, where consumers are terminating
expensive long-term PayTV packages (‘cord-cutters’) in favour of internet services combined with month-to-month subscriptions
to streaming platforms. The loss of licensing and advertising revenue is expected to continue fuelling providers to move their
best content away from PayTV to direct-to-consumer (DTC). This has been evidenced by Disney, who is pivoting its core strategy
away from PayTV and recently announced its intention to close 100 international TV channels and migrate content to Disney+.
Other major media companies including Comcast, WarnerMedia, ViacomCBS and Discovery have also launched DTC services
over the past two years, driving consumers to switch to subscription video on demand (SVOD) offerings. SVOD subscriptions are
expected to increase by 591 million between 2020-26 to reach 1.5 billion, an increase of 65% (Digital TV Research).
In addition, the recently announced divestment of WarnerMedia (that includes brands HBO, Cartoon Network and CNN) by AT&T
will see it combine with Discovery to create one of the largest entities in entertainment, while Amazon intends to acquire MGM
Studios to bolster the Amazon Prime video service with a large catalogue of content that will include James Bond, Rocky and
Real Housewives to name a few. The acquisition also brings the talents and experience of a fully-fledged studio to Amazon, which
should help in producing high quality originals like MGM’s recent hits such as The Handmaid’s Tale and Fargo.
Going forward, it is difficult to know whether simultaneous release on PVOD will become the norm to optimise revenues
through earlier exploitation of streaming services. However, despite the pandemic, large media companies are committing to
ever increasing budgets to create new programmes. Earlier this year, Netflix announced it will spend $17 billion on content in
2021; Amazon spent $11 billion on TV series, movies and music for its Prime services in 2020, an increase of 41% from 2019; while
Disney expects to spend $8-9 billion on content for Disney+ by 2024 (excluding spend on feature films and TV shows distributed
elsewhere that may also become available on the platform). At launch, Comcast pledged about $1 billion per year for four years
on content and marketing to launch its Peacock service. WarnerMedia committed between $1.5 billion and $2 billion for content
on its HBO Max platform in its first year, with $1 billion budgeted for each following year.
Globalisation of content
Netflix provides localised versions of content in around 27 languages across 190 countries. Amazon Prime (available in over 200
countries) makes available a similar number of language versions. Disney+ original titles are available with subtitles and dubbed
audio in 21 languages across 59 countries and additional languages continue to be added as the company progresses its global
expansion.
Content is going increasingly global as non-English feature films and TV series become more and more popular amongst
international audiences. Quality international content is in high demand and widely sought after by streaming platforms. In 2020,
review website Rotten Tomatoes chose Netflix’s first German-language show, Dark, as the best Netflix Original series. The second
season of Iceland’s Trapped was watched by 10 million people in the United Kingdom, Germany, France, and across Scandinavia.
Distribution demand for the Spanish La Casa de Papel (Money Heist) soared and the show’s fourth season in April 2020 was
32 times more in demand than popular English-language series like The Walking Dead, Westworld, and Game of Thrones. The
opening of global markets for such content, which hitherto may have been accessible only in the country of origin, is providing
vast archives of untapped programming that may, over time, find its way onto streaming services – a great opportunity for ZOO.
All global streaming companies are paying particular attention to the high growth markets in Asia where the increased penetration
of broadband and wireless networks is creating significant demand for SVOD services. China’s absolute growth is forecast to
exceed that of the United States between 2018 and 2023 for the first time (at a CAGR of 7.7%), while Indonesia, Vietnam and
the Philippines are expected to grow (according to the latest PwC Entertainment and Media Outlook) at 9.4%, 7.1%, and 6.1%
respectively.
COVID-19
The impact of the global pandemic was felt early across the entertainment industry as many struggled to work from home
while maintaining robust levels of data security. ZOO initially experienced a dramatic drop-off in the order book and increasing
uncertainty as customers migrated to home working between February and April 2020 when their placement of orders was
temporarily suspended. A large proportion of the work the Company processed at that time related to new original titles, the
production of which was halted.
However, ZOO’s cloud software platforms enabled the company to transition seamlessly to working from home and continue to
provide an efficient, secure and uninterrupted service. The pandemic highlighted the resilience of ZOO’s model in contrast to the
disruption experienced by traditional providers reliant on travel and people working in proximity. ZOO was also well positioned
to adapt quickly to the changing focus of customers as their attention shifted to back catalogue content. This was possible due
to the end-to-end (E2E) service offering that ZOO provides, including a portfolio of media services that are required to prepare
content for digital distribution. Over the course of the financial year, the significant temporary decline in demand for services
around new original content was more than offset by the rise in demand for media services, a consequence of the accelerated
drive by content owners to migrate catalogues to streaming for which such services are required to a greater extent.
ZOO’s ability to continue to deliver services meant that the company received a much higher level of customer enquiries in the
period from April 2020. The Company worked to finish projects that had been begun by other vendors and on newly completed
titles that would previously have been dubbed by traditional studios. For new customers, ZOO was able to demonstrate the
benefits of its cloud-based dubbing service as not only a more efficient means to complete projects quickly but also to deliver
high quality results.
The roll-out of vaccines has enabled some productions to resume, with Netflix now producing safely in every major market
except Brazil and India. As a result, the Board anticipates that new titles will become ready for localisation in volume commencing
in the third calendar quarter of 2021.
During this period, ZOO was also approached to work on Automated Dialogue Replacement (ADR) projects. ADR is the process
of re-recording original dialogue after the filming process to improve audio quality, facilitate lip-sync dubbing and make changes
to the originally scripted dialogue. It is a standard practice when creating premium scripted entertainment and its production
has similarities to the process of dubbing. With screen actors unable to travel, customers turned to ZOO to enable the efficient
production of ADR recordings using the company’s ZOOdubs platform. This experience enabled us to identify a new market
opportunity and launch our remote ADR service offering during the year.
Strategy
ZOO is pioneering and innovating in the markets in which it operates. ZOO’s strategy is to deliver significant competitive
advantage by making operations more efficient, ensuring consistently high-quality results, and developing service capabilities
specific to the needs of its customers and the market. The strategic plan is built on the foundations of five pillars: innovation,
scalability, collaboration, customer, and talent. Good progress has been made in all areas during the past year.
Innovation
ZOO’s services are performed and delivered predominantly using its own proprietary cloud computing platforms that give the
company competitive advantages through streamlining operations, and automating administrative processes and technical
functions to enable efficient collaboration over the internet. These platforms bring many benefits to ZOO, its customers, and
collaborators, including efficiencies in working practices, reduced production times, security, quality assurance and scalability.
ZOO’s ongoing commitment to product innovation provides it with strategic differentiation in its sector and the Board expects
that this investment will continue to strengthen the Company’s position as an E2E vendor in a growing market. Significant product
innovations in the period include:
• ZOOstudio – a secure platform that provides a centralised system to manage localisation and media service operations.
It provides a single source of order and fulfilment and affords efficient collaboration, sharing of assets and reference
materials, with in-built ERP functionality that is specific to the domain and configurable for each customer. ZOOstudio
is licensed by a major streaming service where it is being used to manage all production operations. This platform has
been developed further during the period in recognition of its strategic value in supporting a greater breadth and depth of
integration with customers. During the period it has been enhanced through the addition of a wide range of new features,
including integration with finance systems, support for invoicing, tools to assist with bulk order creation, report generation
and integrated features to enable customer review of dubbed soundtracks.
• ZOOdubs – enables the entire creative and technical tasks associated with dubbing to be orchestrated and performed
in a distributed fashion. Greater functionality has been added to support new features, including simultaneous recording
of multiple voices, integrations with industry tools, automated generation of cue sheets, automated generation of Audio
Description script review, enhancements for ADR, automated take editing and enhanced integrated video chat. In addition,
a mobile application has been developed to support recording and playback.
• ZOOmedia – a newly developed platform that provides a centralised service for source media management, including
ZOO Digital Group plc Annual Report 2021 Page 25
automated creation of personalised watermarks for each user and other security enhancements. Other cloud platforms
including ZOOdubs, ZOOsubs (subtitling management and production) and ZOOscripts (original version script production
and management) have been integrated with ZOOmedia to enable efficient handling of assets throughout the end-to-end
(E2E) workflow.
• ZOOsign – a new platform to support the electronic processing of complex legal documentation that must be created and
managed for dubbing projects, including Assignment of Rights agreements.
We continue to be proactive in protecting the innovative aspects of our product developments and have filed two new patents
during the period.
Scalability
The scalability of ZOO’s offering arises through the capabilities of its cloud-based software platforms that provide automation
features and facilitate efficient collaboration over the internet. In addition, scalability is due, in part, to a large community of
freelance workers with which the company works to fulfil customer projects in a cost-efficient way. Most of these freelancers
are media localisation specialists, including translators, voice actors, script adapters and dubbing directors. By the end of the
period under review the number of active contractors in our systems grew to 9,207, up from 7,184 a year ago and 8,272 at the half
year point. We have expanded this pool across the growing number of languages that are being ordered by our customers, and
to build capacity for dubbing ahead of the greater demand that we anticipate once lockdown restrictions are lifted and new title
productions resume at pre-pandemic levels.
Collaboration
We have continued our strategy of working with local dubbing studios to establish a presence for ZOO in key territories
particularly where this arrangement is requested by customers, with the number of partner studios and vendors across all service
lines rising to 232 from 155 in FY20. We have a growing number of partners experienced in using ZOO’s platforms to enable
efficient management and recording of dubbing projects, including hybrid scenarios in which some voices are recorded in
traditional studios while others are recorded at remote locations.
We have been strengthening our academic partnerships in both research and education. From a research standpoint, we have
engaged on several collaborative projects with specialist groups at the University of Sheffield in the areas of speech and hearing
technologies, natural language processing and linguistics. We expect that these will lead, in due course, to new assistive features
in our platforms for enhancing the productivity of our staff and freelance workers. We also have several new initiatives in the
pipeline to create innovative speech and hearing technologies that will commence in FY22 and which we expect will deliver
competitive advantages in the future.
Experience of ZOO’s platforms is being sought by students hoping to enter the sector. As part of a new initiative entitled ZOO
Academy, several universities that offer media localisation courses and/or modules are now incorporating the use of ZOOsubs
and ZOOdubs on their curricula. These include University College London, University of Sheffield, University of Essex, University
of Malta, and Alicante University. To address the shortage of talent in certain disciplines and languages, we have also been
working with an educational partner on the development of online training courses that we plan to launch in FY22.
Our collaborative initiatives in both research and education have the added benefit of enabling us to identify highly capable
individuals who have the appropriate skills to join ZOO’s ecosystem in the future.
Customer
ZOO’s strategy is to target primarily the organisations that create significant volumes of original entertainment programming and
seek to exploit that content through international distribution. These are mostly large media companies that take a multi-vendor
approach to the sourcing of localisation and media services. Each such company operates its own framework for the selection
and engagement of partners, which leads to the appointment of typically three or four preferred vendors. ZOO’s aim is to secure
preferred vendor status and, over recent years, has had a high success rate; the Company holds this status today with six major
media companies and streaming services.
The relationship that ZOO has in place with a major streaming service provider (announced in 2019) continues to go from strength
to strength. This customer has licensed ZOOstudio for managing procurement of the activities required to prepare both new
and catalogue content for distribution through its streaming service. The enhancements made to this platform over the last year
provide additional operational efficiencies and benefits to this customer, further strengthening the relationship between the two
companies. As a result, ZOOstudio is used more widely within this organisation, including across multiple operating divisions.
Performance metrics tracked monthly by this customer confirm that ZOO is performing at the highest levels in the industry.
During the period, ZOO was selected and has been operating as a vendor to support the international roll-out of an advertiser-
supported video on demand service.
In the current period, ZOO was engaged by several content licensors to provide localisation and media services to prepare back
catalogue content for global distribution on the Netflix platform. This follows the Company’s appointment as a Netflix Preferred
Fulfilment Partner in 2018.
This year, the company was also selected as the sole subtitling and captioning vendor for a new video-based service that was
launched in English-speaking countries, and which is expected to expand its distribution into other territories in the next year.
ZOO’s retained sales KPI was 98.5% (FY20: 97.3%, FY21H1: 98.4%), which illustrates the high level of satisfaction of customers with
the Company’s performance.
Talent
ZOO seeks to attract, develop, and engage staff to grow capability and capacity across all functions. During the period, the
Company launched its Advocates programme to engage with experienced and progressive practitioners of the dubbing market
across several countries and territories, bringing the benefit of their insights, expertise, and contacts with local buyers as well as
relationships with talent for voice acting, directing and script adaptation.
Our appointments over the past year are of individuals with great experience, a modern approach and outlook that complements
ZOO’s strategy, and include:
• Teresa Alonso – appointed Dubbing Territory Manager for Spain and Portugal in February 2021. With more than 21 years
of experience working for Sony Pictures Entertainment in Spain, Teresa brings extensive expertise to the newly created
position at ZOO.
• Dave Concors – appointed Head of Sound in October 2020. With more than 30 years of experience working on both
features and episodic content, Dave is using his wealth of industry knowledge to refine dubbing services at ZOO. Based in
Los Angeles, he has more than 20 years of experience with Disney, exclusively working on foreign theatrical releases, which
included mixing work on Disney, Marvel, Pixar and Lucasfilm projects. He is an Emmy Award winner for ‘outstanding sound
mixing’ for the long-running NBC show, ER.
• Mariusz Jaworowski – appointed Creative Director for Central and Eastern European dubbing in January 2021. Mariusz is a
leading name in the dubbing industry with more than 21 years of experience as executive creative director at Disney. In his
previous role, Mariusz managed and supervised the creation of local versions of feature animation and live action films for
both the theatrical market and TV series.
• Andreas Kaj – appointed as Dubbing Territory Manager for the Nordics in January 2021. Andreas is responsible for
delivering high-quality dubbed projects to ZOO’s global clients from his territories, which include Sweden, Norway, Finland,
and Denmark.
• Abeer Shabo – appointed as Dubbing Territory Manager for Middle East in June 2021. With over 30 years experience in
the dubbing industry, Abeer is enhancing intercultural exchange through media localisation between the Arabic region and
other territories.
• Ewa Zawadzka – appointed Head of Dubbing for EMEA in May 2021. With over 10 years in dubbing and localisation, Ewa
brings a wealth of experience to ZOO. Her previous roles include dubbing management positions at both BTI Studios and
Iyuno-SDI Group, most recently in the role of global client director.
Review of Operations
The Company’s revenues are predominantly from the supply of services and fall into two key segments: Media Localisation, which
includes subtitling and dubbing, and Media Services. In the past these have been delivered primarily through ZOO’s facilities
in the United States and United Kingdom. However, during the period we have expanded our facilities in London and Dubai
to access the experienced talent available in those locations and grow our international footprint. A third segment, software
solutions, relates primarily to recurring sales of legacy systems.
Media Localisation
The requirement for localisation in the entertainment industry exists for both newly produced titles and those that have been
released previously (“catalogue titles”). Most newly produced titles are simultaneously distributed to international audiences
and require localisation into many languages over a short period. In contrast, catalogue titles will usually have been previously
localised into at least some languages and, therefore, repurposing them for streaming services will incur work in conforming
pre-existing assets to the requirements of the destination platforms and quality control, but proportionally less origination of
translations into additional languages.
Media localisation in the industry has been affected by the temporary halting of new title productions and ZOO’s media
localisation segment has followed the trend of the market more widely, delivering $20.3 million compared with $20.8 million in
FY20.
The services that fall within this segment are subtitling, captioning (for the deaf and hard-of hearing), dubbing and audio
description (for the visually-impaired).
Subtitling and captioning – orders were weaker than the prior year due to a reprioritisation of customer orders from new
titles to catalogue during the pandemic, resulting in a reduced subtitling requirement. We expect orders to recover once
new productions resume, which we expect to take place in the third calendar quarter of 2021. At the time of writing, since
launching this service in 2014, ZOO has created and stored over 400 million subtitles and captions on behalf of customers.
Dubbing – ZOO received a greater number of orders for dubbing, particularly in the first half, despite the wider market being
adversely affected by lockdowns. With more customers enjoying a favourable experience of working with ZOO, the Board
expects that the Company will increase its market share for dubbing when new productions resume. During the period,
the Company has undertaken dubbing projects for leading media companies and has been able to profile its work on The
Whistlers for Magnolia Pictures, American Gods for Fremantle, Cleo and Cuquin for Animaccord and Pose for FX Networks.
During the year, we observed a growth in demand for dubbing into English. The lack of established traditional infrastructure
in the industry for English dubbing, coupled with the benefits afforded by the ZOOdubs platform and demonstrated to
clients during the pandemic, mean that the company is well placed to capitalise on this growing requirement.
Audio Description – the increasing importance of accessibility is leading to growth in demand for AD services, which are
available on most Netflix Original titles and most of the content on Disney+. We have observed more companies making
a commitment to accessibility features for their audiences and anticipate that we will continue to see a growing demand.
ZOOdubs incorporates several features to enable the efficient production of AD streams which has been valuable to
support the growth in demand we have seen for these services.
ZOO Digital Group plc Annual Report 2021 Page 27
Media Services
Media Services incorporates several service lines that relate to the processing and packaging of TV and feature film content.
Referred to as ‘Digital Packaging’ in previous reports, the segment has been renamed to reflect the broadened scope of services
that are now being requested by our customers.
ZOO’s combined offer of localisation and media services qualifies the company as one of the few ‘end-to-end’ (E2E) vendors in
the industry – a one-stop-shop for all activities that are required to prepare original content for distribution worldwide through
OTT services. We refer to this as our “Post to Platform” offering, which provides the end-to-end technical and management
services needed to fulfil content packages to all major streaming services in all territories, beginning after the completion of
post-production and ending once the titles are accessible to consumers on streaming platforms. Our teams create or conform all
the components required for each delivery package – including subtitles, metadata and graphics – accurately and compliant with
each platform’s unique specifications. The service is available 24/7 from our facilities in Los Angeles, Dubai, and London.
There is a growing preference of buyers within the sector to select E2E vendors due to the convenience and administrative ease
of working with fewer, more capable suppliers. As with localisation, the requirements for media services apply whether content
is new or catalogue. However, depending on the age of the content, the requirements can be significantly greater when working
with catalogue titles which may need to be brought up to the technical specifications and quality standards required by modern
streaming platforms. Consequently, the decline in availability of new content during the pandemic and the refocus of customers
on back catalogues has led to a significant increase in demand for media services, resulting in sales for the period of $17.5 million
(FY20: $7.4 million), a growth of 136%.
Two of the service lines that have grown significantly in the period are metadata preparation and “asset health checks”. Content
metadata is descriptive programming information, such as title, actors, description, release date, running time, and genre. It allows
consumers to make selections of content for viewing and to perform searches. The large back catalogues of content that have
migrated to OTT platforms over the past year have necessitated the preparation of compliant metadata, which is then localised
into each language for which the content is available. ZOO’s “asset health check” assesses materials to determine what work
will be necessary to enable their preparation for OTT distribution and estimates the associated cost. One such assignment
completed by ZOO in January 2021 involved 780,000 items of metadata across 13 languages. The Company is well placed to
undertake such projects due to the proprietary cloud platforms it has developed, which bring efficiencies and scalability and
enabled this project to be completed rapidly.
During the period ZOO provided for the first time ADR services in response to clients that were unable to complete projects in
the traditional way due to lockdowns. We have since developed new features in ZOOdubs to streamline the ADR production
process and anticipate further demand for these services once new productions resume.
Due to increased demand, we have made infrastructure investments and recruited additional staff to expand our capacity for
mastering. Mastering is the process of finishing or finalising a programme after post-production to synchronise the video and
audio tracks, conform to technical requirements of the target platforms, and perform compression and encoding of the audio-
visual materials. We anticipate a growing demand for mastering services in FY22 and beyond, primarily because of the shift by
customers to the E2E model.
Investing for future growth
The evolution of the broader market together with the demand for our services presents ZOO with a unique and significant
opportunity to seize market share and grow. To support this, in March 2021 we undertook a non-pre-emptive fundraise by way of
a placing of shares with new and existing shareholders, raising in April gross proceeds of £7.4 million ($10.3 million).
The Board’s intention is to use the net proceeds of the placing to accelerate the Company’s commercial position by building
balance sheet strength to further scale the business through the following key initiatives:
1. Growing the R&D team – through our close working relationships with our customers, we recognise further significant
opportunities to enhance our existing cloud platforms and develop new products and functionality that will deliver greater
differentiation and maintain our competitive advantage over our peers. We intend to establish a longer-range research
function to build on several initiatives we have already begun in the areas of machine learning and AI, and to expand our
collaboration with academic research partners.
2. Establishing regional hubs for media services – these will enable us to support our customers as they invest in
international series and require media services for locally sourced content in key growth markets such as India, Middle East
and Southeast Asia.
3. Expanding international business development – with the establishment of regional hubs in key locations we will also
expand our business development team to give us wider international coverage and support our customers as they seek to
grow on a global scale.
4. Expanding the service delivery teams – with the greater volumes of orders that we anticipate in the period ahead, we will
expand certain delivery teams to ensure that we have sufficient capacity for oversight of projects. This will include project
managers, quality control staff, video and audio specialists, and our in-house English team – responsible for overseeing the
preparation of all English materials, the quality of which is critical to ensure the highest creative standards are upheld.
5. Increasing capital expenditure – due to the greater volumes of work that we are receiving, we are upgrading our IT
infrastructure at our existing production facilities in the United Kingdom and United States to give us greater data
throughput and storage, and we will ensure that the IT facilities in place at our other locations are adequate and allow us to
deliver a 24/7 service.
6. Providing general working capital – having greater working capital at our disposal means that we can react quickly to
our customers as their requirements unfold and change, and can continue to play our part in the transformation of the
entertainment industry.
People
Our recruitment drive to expand our capacity and support future growth in all our facilities has been unrelenting. The past year
represents the period of fastest addition of staff in ZOO’s history, with total headcount across the Group at year end being 298
versus 228 in the prior year, an increase of 31%.
The excellent financial performance that we have delivered during a year of unprecedented challenge is a testament to the
talent, adaptability, and passion of all those who work for and on behalf of ZOO to whom I express my heartfelt appreciation. The
pandemic-related challenges have had an impact on every group within the Company, yet everyone has responded magnificently,
adapting to new ways of working, collaborating, and recruiting. It has been no mean feat to have embraced a far greater number of
customer projects than at any other time in our history, whilst consistently meeting or exceeding expectations. The performance
metrics tracked by our customers confirm that ZOO is one of the leading vendors in the industry, for which we have our excellent
team and freelance community to thank.
Our mission is to be the partner that makes globalisation easier for the world’s best content creators. We take complex media
content challenges and make them simpler by finding smarter and better ways of doing things. This is only possible due to the
culture of ZOO which is lived every day by each of our people: we are open to learning; we look at things differently to find
new and creative ways to take on any challenge; everyone is valued; we put ourselves in our customers’ shoes to anticipate
their future needs; we think big and bold, believing that disruption favours the brave; and we never underestimate the power of
determination. New recruits are selected based on their alignment with this culture code, and its impact extends to every part of
the business. Its embodiment in all our people is the ZOO secret sauce that makes us stand out in the market.
Outlook
Trading in the first quarter of FY22 has been strong and ahead of the prior year period, continuing the momentum built over the
last year. Based on current visibility, we expect to deliver significant growth in the first half. We have started to see signs of new
productions being completed although this is still some way from pre-pandemic levels. However, all indications are that the
former levels of production volumes will resume and will likely be exceeded. The on-going investment being made in facilities,
infrastructure and people will position us well to support our customers with greater volumes of business.
We continue to receive significant orders for project work relating to catalogue content not only because of titles being adapted
for OTT for the first time, but also due to streaming platforms launching their services in new geographies. Given the global
appeal of quality entertainment content that has already been demonstrated by leading OTT providers, there exist vast untapped
archives of programmes that are likely to find their way to streaming services over many years ahead. This work in particular
favours E2E vendors, given the diversity of services that are required to evaluate such content and undertake all that is necessary
to deliver it to consumer audiences globally. ZOO is well placed to continue to grow its market share for such requirements.
Following the successful fundraise in April 2021, the Board is actively exploring several opportunities to establish regional hubs
for delivering media services in the Middle East, India and Southeast Asia. Initiatives to expand our service and R&D teams and
appoint territory managers in key locations are progressing well.
Given ZOO’s strengthening position in the market for the services it supplies, the competitive advantages that derive from its
proprietary software and the ever-growing market requirements, the Board remains confident of continuing growth and achieving
market expectations.
Stuart Green
Chief Executive Officer
ZOO Digital Group plc Annual Report 2021 Page 29
Financial Review
Revenue
The Company achieved revenue growth of 33% in the financial year
ended 31 March 2021, with total revenues of $39.5 million compared to
$29.8 million in FY20. This demonstrates the real progress achieved as the
business transitioned to one focused on localisation and media services
for global entertainment streaming providers. The growth in revenue
reflects the contract wins in 2019 to support the international launches of
our customers.
Most of the Group’s operations are in the United States, where revenues
were up 34% at $34.0 million. The balance of work was performed in
Europe which grew by 23% to $5.5 million. The split in geographical
production illustrates the international launches of US based streaming services.
In FY21 we experienced an increase in customer concentration, as the revenue contribution from our largest client increased to
72% of sales as a consequence of circumstances relating to the pandemic (FY20: 56%), with the second largest accounting for
4%, down from 10% last year. This is a direct result of a contract win which resulted in us becoming the primary E2E vendor to a
new global streaming service, a relationship that we expect will continue over the long term.
The media localisation segment saw revenues drop by 2% in the year due to the global pandemic which restricted the production
of new titles that are required to support localisation services. We expect growth in this segment to return once new title
production resumes.
The media services segment, our other main segment, saw revenues increase by 136% as our service for OTT platforms was in big
demand as global streaming services repurposed their back catalogues and launched them internationally to fill the gap left by
the shutdown in new productions.
Software solutions, our third segment which has been a reducing proportion of our business, increased by 10% in the year to $1.8
million as a result of bespoke development work for a client.
Segment contribution
The company reports gross profit after deducting both external and internal variable costs to reflect that an increasing proportion
of our revenues are derived from the provision of services to our customers. To add clarity to our financial statements we include
a table of performance by our three key business segments. This shows that overall gross profit increased to $13.6 million in FY21
from $10.1 million in FY20, an increase of 35%.
Media localisation segment contribution fell in the year from $4.7 million to $2.9 million because of two main factors. The first of
these was the revenue decrease of 2% which was attributed to the deferment of localisation projects throughout the year due
to COVID-19, causing direct costs to be proportionally higher than expected. The second factor was a doubling of headcount to
support the longer-term opportunity in dubbing that is not supported by the current level of revenues.
Media services segment contribution more than doubled in the year to $11.4 million. This is explained by a long-term contract
secured to provide a variety of digital packaging services to a new global streaming service. Our unique blend of people and
software positions us well in this high margin business. The segment contribution of 65% was lower than the previous year’s
margin of 74%, and this is due to the mix of services favouring activities that require a high level of translation services that have a
lower gross margin.
Software solution segment contribution held steady at 94% in the year.
Overall gross profit increased by 35% to $13.6 million compared to $10.1 million in FY20. This represents a gross profit margin of
35%, up from 34% last year. The improvement is due to higher margin Media services representing a bigger percentage of total
sales, increasing to 44% compared to 25% in FY20.
Other operating expenses
Operational fixed costs, which are defined as operating expenses less share-based payments, depreciation and amortisation,
have increased by 13% in the year as we invested heavily in people and IT to support our growth plans. Overall, operating
expenses increased to $12.9 million, including share-based payments, depreciation and amortisation and after reclassifying
property costs of $1.0 million to comply with IFRS 16. The 18% increase in operating expenses is explained by the above, the
doubling of the share-based payment accrual and higher depreciation and amortisation costs, due to the expansion of office
space and the increase in R&D.
Finance costs
The main component of the Group’s finance costs relates to the 7.5% convertible loan note stock with a maturity date that
was extended by one year after consultation with the holders in 2020 to October 2021. Interest on the principal in the year was
$0.3 million, approximately the same as FY20. The other two components of finance costs are non-cash items. The first is the
exchange loss on the conversion of the outstanding sterling-denominated debt at the year-end due to the strengthening of
sterling relative to the United States Dollar in the year, which has given rise to an exchange loss of $0.4 million. The second is
the increase in the fair value of the embedded derivative at year-end calculated with reference to the share price movement
in the past 12 months and the expected value to loan note holders at the point of conversion. This has given rise to a non-cash
$3.5 million loss.
These non-cash accounting entries, above, have had an impact on the profit/loss before tax for the year ended March 2021, which
was in total a loss of $3.6 million (FY20: loss of $0.1 million).
As a result of the increase in revenues coupled with the improved gross profit the operating profit of $1.0 million compares to a
loss last year of $0.6 million. On the Company’s preferred measure of profitability, being EBITDA before share-based payments,
the profit was $4.5 million, up from $2.1 million in FY20, due to the reasons explained above.
Post balance sheet event
Since the end of the financial year, we are pleased to have completed a 10% placing of new equity raising a gross $10.3 million.
This money will be used to accelerate our international growth brought about by the favourable market conditions. The details of
the placing are that the company has raised gross proceeds of £7.4 million ($10.3 million) through the oversubscribed placing of
7,454,727 Ordinary Shares with certain existing and new institutional and other investors at a price of 100 pence per New Ordinary
Share. The shares were admitted to trading on the 6 April 2021.
Statement of financial position
Non-current assets increased by 8% in the period which is mainly due to an increase in the purchase of fixed assets such as
computer and production equipment that totalled $2.2 million. The increase in expenditure was used to upgrade our production
systems in both the United States and United Kingdom to cope with the increased volume of assets we are handling. The gross
expenditure was partly offset by a larger depreciation charge relating to leasehold properties. The capitalisation of research and
development costs increased by 41% to $1.3 million as we accelerated the product roadmap to support customer requirements.
This also increased the depreciation charge resulting in the balance sheet asset increasing by only 7% to $2.5 million.
Trade and other receivables have increased 10% compared to last year to $10.2 million reflecting the strong sales performance
in the second half of the year. This increase was mirrored in trade and other payables as work performed by suppliers and
freelancers peaked to support our customer deliveries.
Current borrowings have increased from $4.4m to $5.0m. This is partly due to the appreciation of the UK currency making the
convertible loan note more expensive in US dollars which added $0.4 million to the liability. In addition, we took out short term
leases to fund some of the computer equipment acquired in the year with a $0.3 million impact on current liabilities. Also
included in current liabilities is the separable embedded derivative which is attached to the loan notes and this instrument
increased in value by $3.5 million due to the higher share price at the year end compared to the previous year. This is a non-cash
liability and will be reversed when the loan notes mature in October 2021.
Cash and cash equivalents of $2.9 million at year end, (FY20: $1.2 million) were up 142% reflecting the revenue and profit growth in
the year.
Non-current liabilities, fell in the year as our overdraft facility remained unused at the year end, compared to a $0.5m overdraft at
the end of the year end 31 March 2020 and due to the reduction in the “right to use” liability as our property leases have a shorter
time to run.
Consolidated statement of cash flows and going concern
Net cash generated from operating activities was $6.8 million, up from $1.3 million in FY20.The improvement of $5.5 million is
attributable to the operating profit, an increase in depreciation on leases and an increase in trade payables. The inflow from
operating activities was partly offset by a $2.1 million increase in investing activities and an increase of $1.0 million from financing
the business. The investment outflow was attributable to our ongoing development programme and significant upgrades to our
IT infrastructure. The financing outflow relates to the cost of repaying the office leases, interest on the leases and interest on the
convertible loan notes.
Going forward the business remains confident that it has sufficient headroom to trade for the foreseeable future, as the recent
placing gives us cash to fund operating activities and our investment in growth. This is further validated by the strong start to FY22,
with record orders which we expect to deliver another operating profit for FY22 and has been stressed tested by our financial
modelling. For this reason, we continue to adopt the going concern basis in preparing the financial statements.
Principal risks and uncertainties
Company law requires the Group to report on principal risks and uncertainties facing the business, which the directors believe to
be as follows:
International business
While the Group is domiciled in the UK, its main country of operations is the US operations and over 86% of ZOO’s revenues
come from overseas clients. As with most small international businesses cash flow and exchange rate fluctuations management
present a risk. The Group continues to focus closely on conservative cash management and monitor currency transactions taking
proactive actions when appropriate.
COVID 19
Although the Group was able to transition staff quickly to working from home arrangements and its operations have been largely
unaffected by the pandemic, the COVID-19 affect on customers may cause them to reduce the number of titles and/or languages
into which they procure localisation services from ZOO. The experience of the last 12 months has been positive for ZOO with our
main customer placing a significant increase in orders with us, however, we remain vigilant in case circumstances change.
Section 172 statement
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders in their
decision making. The Directors continue to have regard to the interests of the Company’s employees and other stakeholders,
ZOO Digital Group plc Annual Report 2021 Page 31
including the impact of its activities on the community, the environment and the Company’s reputation, when making decisions.
Acting in good faith and fairly, the Directors consider what is most likely to promote the success of the Company for its members
in the long term. We explain this in our corporate governance section of this Annual Report. The Directors are fully aware of their
responsibilities to promote the success of the Company in accordance with section 172 of the Companies Act 2006. The Board
regularly reviews its principal stakeholders and how it engages with them. This is achieved through information provided by
management and also by direct engagement with stakeholders themselves. The Company enhanced its methods of engagement
with the workforce by appointing a group human resources manager last year and this has improved staff engagement, as
evidenced by the recent staff engagement survey. During the coming year the Directors will continue to value input from
all stakeholders and this will be formalised in more detail in the coming months. In the opinion of the Directors the following
significant events or decisions were required to be separately reported under this section.
• The Board reacted swiftly in response to the onset of Covid-19 implementing a working from home policy for all employees
and making resources available so that all employees could work productively from home. A further review was conducted
as the various lockdowns were eased to ensure that those employees who wished to return to the office could in a safe and
secure environment.
• The Board reviewed the Company’s financial facilities and working capital position approving a successful equity fundraise
to strengthen the balance sheet and to provide liquidity to enable the drive for future growth which completed on 6 April
2021.
Political uncertainty
The political climates in the UK and US are currently challenging due to the uncertainty surrounding the post COVID19 economic
environment. The directors monitor emerging news and trends and remain alert to any potential impact on the trading of the
Group.
Technology conservation
The Group continues with a patent protection policy, with 16 patents granted and a further three pending, having allowed some
legacy patents which are no longer beneficial to lapse. These active patents are integral to the business in the protection of our
unique technologies.
Operational risks
The main operational risk is managing any unexpected peaks or troughs in production orders and ensuring that the appropriate
levels of resource are available to provide the quality of services expected by our clients. This risk is managed by having a core
of highly skilled permanent staff along with a pool of temporary staff that can be brought in at short notice to help at times of
high volume. In the current year we have supplemented these resources by engaging international businesses to operate within
our technology platform, giving us further variable cost capacity. The use of technology helps mitigate this risk by streamlining
processes as much as possible and enabling efficient access to a large, global and scalable pool of independent contractors.
Loss of the Group’s key clients
Client relationships are crucial to the Group and the strength of them is key to its continued success. The Group mitigates this risk
by a diverse number of contacts working closely with the largest clients across different business units and seeking to secure long
term contractual agreements for supply of technology and services. The Group focusses on providing high quality services to all
clients to ensure an attractive and differentiated offering thereby reducing the likelihood of client loss.
Corporate activity within key clients
Merger and acquisitions within key clients represent a risk as they can disrupt sales. This risk is mitigated by ensuring an
awareness of news in the market and focussing on diversifying the client base.
Financial risks
The main financial risks faced by the Group are in relation to foreign currency and liquidity. The directors regularly review and
agree policies for managing these risks.
The functional currency and presentation currency of the company are US dollars as the majority of the Group’s transactions
are undertaken in US dollars, however, the Consolidated Statement of Financial Position can be affected by movements
between pound sterling and the US dollar as the parent company and UK subsidiaries have some pound sterling debtors and
creditors. Foreign currency risk is managed by matching payments and receipts in foreign currency to minimise exposure. Further
information on the financial risks is given in note 28 to the accounts.
The Group is exposed to the usual credit risk and cash flow risk associated with selling on credit and manages this through credit
control procedures. The Group regularly monitors cash flows and cash resources and has the ability to draw down funds from
financing facilities in the UK.
By order of the board
Phillip Blundell
Director and Secretary
Corporate Governance Statement
All members of the board believe strongly in the value and importance of good corporate governance and in our accountability
to all of ZOO’s stakeholders, including shareholders, staff, clients, our growing network of freelance workers and other suppliers. In
the statement below, we explain our approach to governance and how the board and its committees operate.
The corporate governance framework which the group operates, including board leadership and effectiveness, board
remuneration, and internal control is based upon practices which the board believes are proportional to the size, risks, complexity
and operations of the business and is reflective of the group’s values. Of the two widely recognised formal codes, we decided
in 2018 to adhere to the Quoted Company Alliance’s (“QCA”) Corporate Governance Code for Small and Mid-Size Quoted
Companies (revised in April 2018 to meet the current requirements of AIM Rule 26).
The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to
be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting
the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the board
judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to
each. The board considers that it does not depart from any of the principles of the QCA Code.
Board Composition and Compliance
The QCA Code requires that the boards of AIM companies have an appropriate balance between executive and non-executive
directors of which at least two should be independent. I have assumed the role of chair of the Remuneration Committee and
member of the Audit Committee. I am assisted by Mickey Kalifa as the group’s second independent non-executive director.
Board Evaluation
For many years we have supported the QCA Code’s principle to review regularly the effectiveness of the board’s performance
as a unit, as well as that of its committees and individual directors. The most recent review was in February 2021. A number of
refinements in working practices were identified as a result of this exercise and have since been adopted. We will be considering
the use of external facilitators in future board evaluations.
Shareholder Engagement
We have made significant efforts to ensure effective engagement with both institutional and private shareholders. In addition
to the usual roadshows following the release of full year and interim results, each of which was expanded to include a greater
number of existing and potential new investors, we have actively promoted our AGM as a forum to present to and meet with
investors, and presented at a virtual investor conference. The company has also continued to distribute a quarterly shareholder
newsletter to which investors can subscribe via email, providing an easy to access source of information on operational activities
taking place within the group.
The board has continued to commission Progressive Equity Research to produce and provide both institutional and private
investors with independent research on the group.
The board has ultimate responsibility for reviewing and approving the Annual Report and Accounts and it has considered
and endorsed the arrangements for their preparation, under the guidance of its Audit Committee. The Directors confirm the
Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for
shareholders to assess the group’s position and performance, business model and strategy.
The following paragraphs set out ZOO’s compliance with the 10 principles of the QCA Code.
Establish a strategy and business model which promote long-term value for shareholders
The purpose of the group is encapsulated in the expression of its mission, which is to make life easier for the people who
entertain the world. Our business model is to provide media localisation and media services to content owners and distributors.
Our strategy is to deliver these through a combination of proprietary software technology that acts as a competitive
differentiator, and a large global network of linguistic professionals engaged on a freelance basis. We believe this will deliver a
profitable and highly valued business and competitive advantages over other providers of similar services, leading to faster turn-
around of projects, to a consistently high quality at an attractive price point.
The key challenges we face include:
• Maintaining consistently high levels of quality – very high standards are now expected by the digital distributors who
influence much of the localisation that is commissioned by industry players. We have implemented automated testing
wherever possible, and our system-driven workflow management ensures that manual linguistic quality control is engaged
as necessary. In the case of dubbing operations, we have developed software to analyse the acoustic performance of
recording environments to ensure they meet minimum specifications.
• Ensuring security of client assets – the safekeeping of materials is of paramount importance. Our production facilities in
Sheffield, London and Los Angeles are audited for security annually by the Trusted Partner Network. Features to prevent
the copying of assets and provide effective deterrents are implemented throughout our proprietary software and systems.
During the period we enhanced features within our software that provide a high level of deterrent for copyright theft.
• Delivering continuous availability – a failure in the group’s systems could lead to an inability to deliver services. This
is addressed by operating redundant systems across multiple availability zones, a comprehensive disaster recovery
programme and assigning staff from both UK and US facilities on each project. During the period the group moved all of its
staff to working from home arrangements while delivering uninterrupted service and maintaining the same high standards of
quality and security.
ZOO Digital Group plc Annual Report 2021 Page 33
• Operating a large freelancer network – the group’s capacity for processing orders is dependent, in part, on the network of
freelance workers. The cloud software is enhanced on an ongoing basis to make the group’s systems increasingly attractive
to freelance workers. Financial processes are designed to ensure that all freelancers are paid on time. A process of peer
review is implemented in the group’s production systems to ensure that all work undertaken by freelancers is independently
checked and verified and its quality is assured.
• Recruiting and retaining suitable staff – the group’s ability to execute its strategy is dependent on the skills and abilities
of its staff. We undertake ongoing initiatives to foster good staff engagement and ensure that remuneration packages are
competitive in the market. We are adopting hybrid working as a permanent practice across the group following successful
operations through the lockdown periods of the past year.
We believe we have the right strategy and service in place to deliver strong growth in sales over the medium to long term. We
expect the gross profit of our localisation segment to improve in future periods as our dubbing service and software mature,
which will result in improving EBITDA margins or provide us with scope for additional investment in new services. This will enable
us to deliver sustainable shareholder value.
Seek to understand and meet shareholder needs and expectations
Responsibility for investor relations rests with the CEO, supported by the CFO. During the period under review the following
activities were pursued to develop a good understanding of the needs and expectations of all constituents of the group’s
shareholder base:
Date
Apr 20
May 20
May 20
July 20
July 20
Description
Presentations to institutional investors
Broking firms sales and team meetings
Investor newsletter
Preliminary results roadshow and media
meetings
Retail investor presentation
Participants
SG, PB
SG, PB
SG, PB
SG, PB
Comments
Discussion relating to a trading update
Provide an update
Newsletter distributed to subscribers
Institutional investors, analysts and PCB’s
via Zoom calls
Open invitation to retail investors;
presentation with Q&A; recording made
and published on website and via PI World
July 20
Investor calls
Aug 20
Sept 20
Investor newsletter
AGM
GW
Follow-up calls with institutional investors
GW, SG, PB, GD,
MK
Sept 20
Capital Markets Day
SG, PB, GD
Oct 20
LSE/Stifel New York Virtual Investor Conference SG, PB
Nov 20
Interim results roadshow and media meetings
SG, PB
Nov 20
Retail investor presentation
SG, PB
Nov 20
Dec 20
Investor newsletter
Ad hoc investor meetings
Jan 21
Ad hoc investor meetings
Feb 21
Ad hoc investor meetings
Feb 21
Mar 21
Mar 21
Investor newsletter
Analyst meetings
Share placing meetings
Mar 21
Video briefing for retail investors
SG, PB
SG, PB
SG, PB
SG, PB
SG, PB
SG
Newsletter distributed to subscribers
Actively encouraged all investors to
attend event held via webinar; event
recorded and made available on website
Presented event as a webinar including
guest speakers; event recorded and made
available on website
Participated in an investor conference,
including panel discussion and one-on-
one investor meetings
Institutional investor meetings held by
Zoom
Open invitation to retail investors;
presentation with Q&A; recording made
and published on website and via PI World
Newsletter distributed to subscribers
Update meetings with institutional
investors
Update meetings with institutional
investors
Update meetings with institutional
investors
Newsletter distributed to subscribers
Introductory meetings
Presentations to institutional investors and
PCBs relating to a share placing
Produced video explanation of share
placing and distributed to investor mailing
list subscribers
Key: GW: Gillian Wilmot; SG: Stuart Green; PB: Phillip Blundell; GD: Gordon Doran; MK: Mickey Kalifa;
The group is committed to communicating openly with its shareholders to ensure that its strategy and performance are
clearly understood. We communicate with shareholders through the Annual Report and Accounts, full-year and half-year
announcements, trading updates and the annual general meeting (AGM), and we encourage shareholders’ participation in virtual
meetings. A range of corporate information (including all ZOO announcements) is also available to shareholders, investors and the
public on our website.
Private shareholders: The AGM is the principal forum for dialogue with private shareholders, and we encourage all shareholders
to attend and participate through RNS announcements and a quarterly newsletter. The Notice of Meeting is sent to shareholders
at least 21 days before the meeting. The chairs of the board and all committees, together with all other directors whenever
possible, attend the AGM and are available to answer questions raised by shareholders. Shareholders vote on each resolution, by
way of a poll. For each resolution we announce the number of votes received for, against and withheld and subsequently publish
them on our website.
Institutional shareholders: The directors actively seek to build a mutual understanding of objectives with institutional
shareholders. Our CEO and CFO make presentations to institutional shareholders and analysts immediately following the
release of the full-year and half-year results. We communicate with institutional investors frequently through a combination of
formal meetings, participation at investor conferences, roadshows and informal briefings with management. The majority of
meetings with shareholders and potential investors are arranged by the broking team within the group’s Nominated Advisor.
Following meetings, the broker provides anonymised feedback to the board from all fund managers met, from which sentiments,
expectations and intentions may be gleaned.
In addition, we review analysts’ notes to achieve a wide understanding of investors’ views. This information is considered by the
board and has contributed to the preparation of the group’s Investor Relations strategy which was revised and approved in May
2020.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
Stakeholder
Staff – our ability to fulfil client
services and develop and enhance
the cloud software platforms on
which they depend relies on having
talented and motivated staff
Reason for engagement
Good two-way communication with
staff is a key requirement for high
levels of engagement, fostering a
culture of innovation
Clients – our success and
competitive advantage are
dependent upon fulfilling client
requirements, particularly in relation
to quality of service, its speed of
delivery and security
Understanding current and emerging
requirements of clients enables us to
develop new and enhanced services,
together with software to support the
fulfilment of those services
Suppliers – a key supplier group is
our network of freelancers who fulfil
linguistic services
Freelance workers will provide similar
services to other organisations,
including our competitors, so we
must ensure they are available to us
and accommodating
Shareholders – as a public company
we must provide transparent,
easy-to-understand and balanced
information to ensure support and
confidence
Meeting regulatory requirements
and understanding shareholder
sentiments on the business, its
prospects and performance of
management
How we engage
Monthly staff briefings delivered in the UK and
US in person and by webcast.
Invitation to staff to ask questions of
management that are answered in the briefings.
Annual engagement survey.
These have provided insights that have led to
enhancement of management practices and staff
incentives.
Extension of Sharesave scheme.
Seek feedback on services and software systems.
Obtain fulfilment metrics employed by clients to
measure performance.
Obtain requests for new services and service
enhancements.
These have led to the group securing approved
vendor status with a number of large media
organisations.
We optimise our systems to simplify the work
of freelancers as much as possible, including in
relation to administration of projects.
We operate systems to ensure that supplier
invoices are processed and paid promptly.
These have led to a large, growing and supportive
freelancer network.
Regulatory news releases.
Keeping the investor relations section of the
website up-to-date.
Quarterly investor newsletters.
Participation at investor events.
Publishing of videos of investor presentations and
interviews.
Annual and half-year reports and presentations.
AGM.
We believe we successfully engage with our
shareholders; over the past 12 months this
engagement has led to support for the group and
good liquidity in trading.
ZOO Digital Group plc Annual Report 2021 Page 35
Stakeholder
Industry bodies – the services
we provide must meet certain
requirements
Communities – what we do impacts
communities in the places where we
operate and elsewhere
Reason for engagement
The views of certain industry
groups, including the Motion Picture
Association of America (MPAA) and
the Trusted Partner Network (TPN)
are influential in the way the group is
perceived by certain clients
It is important to be, and to be
perceived as a reputable business
that makes a positive contribution to
local economies and is attractive as
an employer and partner
How we engage
Membership of MPAA, MESA and TPN and
participation in security programs.
Annual audit of security.
These have resulted in audit reports that have led
to certain clients commencing engagement.
Multiple activities to support fundraising of local
charities and good causes.
Participation in apprenticeship and other
schemes to support and provide opportunities to
young people.
One director is a trustee of a registered charity.
These have led to a favourable profile for the
group in the local areas of its major operations.
Corporate social responsibility
The Company strives to ensure that its business activities positively benefit all stakeholders by committing to conduct its
business in a fair and responsible manner, to treat its employees fairly, supporting personal growth and development, and to have
a positive impact in its local community.
We strongly value our customers and seeks to deliver a world-class product backed by class-leading customer service and
support. The Company routinely seeks customer feedback and performance appraisal inputs and takes active steps to remedy
any instances of customer dissatisfaction.
Key customers are also routinely invited to provide product improvement inputs, and in some cases to test key features or
functionality prior to general release.
The Company has agreed rate cards with its major customers to provide a fair and transparent pricing structure so that customers
can be confident that the Company’s services are cost effective.
The Company is an Equal Opportunity Employer and its policy is to ensure that all employees and job applicants will be given
equal opportunities in all aspects of employment and training irrespective of their gender, ethnic origin, disability, age, marital
status, sexual orientation or religious affiliation (and/or any other protected characteristics under relevant legislation). ZOO
encourages, where possible, the employment of disabled people and the retention of those who become disabled during their
employment with the Group.
The Company recognises the benefit of involving employees in target setting and keeping employees informed of progress. As
a result of the COVID-19 pandemic, the Group wide meetings (via video conferencing) became much more frequent in FY2021.
The Board felt this was necessary in order to keep employees up to date on progress and to keep employees closely connected
with each other and the business. Due to the size of the Company, regular consultations with senior management take place.
The views of employees are considered when making decisions which are likely to affect their interests. This has included the
introduction of increased ability for employees to put questions to senior management members during Group wide meetings
and has also included the introduction of various digital surveys issued to employees throughout FY21 so that they can give
their views and feedback on relevant Group wide matters. ZOO ensures that it communicates clear and appropriate policies
to employees setting out data protection rules, information security rules, commercial contract rules (e.g. sales contracts,
procurement contracts and partner contracts), commercial dispute resolution rules, share dealing rules, anti-bribery rules, anti-
bullying/harassment rules and anti-discrimination rules and codes of conduct. These policies and procedures are made available
to employees via the Group’s Human Resources Information System and are regularly reviewed and updated as necessary. The
Board regularly reviews, considers and updates the salaries, benefits and support offered to the Group’s employees. The aim
of this is to ensure that individuals with the appropriate experience and skill to add value to the business and drive its long-
term success are attracted to the Group and then retained. In addition, this approach by the Board aims to ensure that staff are
provided with the appropriate environment, career progression and rewards to remain motivated and enabled to produce the
best possible output and add the maximum possible value to the Group.
The Company participates in various charitable activities in the communities in which it operates. The Company has made a
number of small direct financial contributions to charities and Company employees have participated in a number of local charity
events during the year. Looking forward to FY22, the Company will be encouraging employees to actively take two additional paid
leave days each and donate them for the support of charitable projects in the community. The Company will be extending its
involvement with charities that are associated with our industry that are either technology or language based and progress will be
included in next year’s report.
Towards the end of 2020, the Board approved and initiated a project for the Group to become carbon neutral and designated
a member of staff responsible for leading this long-term project to a successful conclusion. This project commenced on the
2 June 2021 and will involve an in-depth review, analysis and evaluation of the carbon emissions of the Company, followed by
the implementation of appropriate changes in policies, procedures and systems to enable the Company to strive towards
its aim of obtaining and maintaining a carbon neutral status. The cloud computing solutions employed for deployment of the
Group’s software platforms provides an energy and infrastructure efficient approach. In addition, the Group’s novel approach to
fulfilling dubbing services through its cloud software enable projects to be performed remotely and in a distributed way, thereby
significantly reducing the requirement of voice actors, dubbing directors and others to travel, and minimising the Group’s need to
own and operate extensive dubbing facilities across many locations. The Group’s current approach to the business/work related
travel activities of its staff remains the main area targeted by this project, along with the way in which such activities are recorded
and reported. This project and its continuation throughout FY22 will demonstrate the Board’s awareness of and regard for the
Company’s impact on the environment and the Board’s intention to ensure that the Company reduces, as much as is reasonably
possible, any negative impact of the Company’s operations upon the environment.
Embed effective risk management, considering both opportunities and threats, throughout the organisation
The CFO has prepared a risk register for the group that identifies key risks in the areas of corporate strategy, financial, clients, staff,
environmental and the investment community. All members of the board are provided with a copy of the register. The register is
reviewed periodically and is updated as and when necessary.
Within the scope of the annual audit, specific financial risks are evaluated in detail, including in relation to foreign currency,
interest rates, liquidity and credit.
Staff are reminded on a monthly basis to report, anonymously or otherwise, any security risks or threat they perceive in the
operations of the business. On receipt of any such notification, a security incident team is mobilised to assess and take remedial
action as appropriate in the circumstance.
Staff are reminded on a monthly basis that they should seek approval from the CFO if they, or their families, plan to trade in the
group’s equities.
Maintain the board as a well-functioning, balanced team led by the chair
The members of the board have a collective responsibility and legal obligation to promote the interests of the group and are
collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach
to, corporate governance lies with the chair of the board.
The board consists of five directors of which three are executive and two are independent non-executives. The board is
supported by two committees: audit and remuneration. The board does not consider that it is of a size at present to require a
separate nominations committee, and all members of the board are involved in the appointment of new directors. The board
intends to appoint additional non-executive directors as its business expands.
Non-executive directors are required to attend 10-12 board and board Committee meetings per year and to be available at other
times as required for video and telephone meetings with the executive team and investors.
Meetings held during the period under review and the attendance of directors is summarised below:
Executive Directors
Dr. Stuart Green
Gordon Doran
Phillip Blundell
Non-executive Directors
Gillian Wilmot
Mickey Kalifa
Board meetings
Audit Committee
Remuneration Committee
Possible
Attended
Possible
Attended
Possible
Attended
12
12
12
12
12
12
12
12
12
12
–
–
2
2
2
–
–
2
2
2
2
–
–
2
2
2
–
–
2
2
The board has a schedule of regular business, financial and operational matters, and each board Committee has compiled a
schedule of work to ensure that all areas for which the board has responsibility are addressed and reviewed during the course
of the year. The Chairman is responsible for ensuring that, to inform decision-making, directors receive accurate, sufficient and
timely information. The Company Secretary compiles the board and Committee papers which are circulated to directors prior
to meetings. The Company Secretary provides minutes of each meeting and every director is aware of the right to have any
concerns recorded in the minutes and to seek independent advice at the group’s expense where appropriate.
Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
All five members of the board bring relevant sector experience in media and technology, all have at least nine years of public
markets experience and two members are chartered accountants. The board believes that its blend of relevant experience, skills
and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. Directors attend seminars and
other regulatory and trade events to ensure that their knowledge remains current.
ZOO Digital Group plc Annual Report 2021 Page 37
Gillian Wilmot, Independent Chairman
Term of office: Appointed as Chairman with effect from 1 July 2019; Chair of
the Remuneration Committee and a member of the Audit Committee.
Background and suitability for the role: Along with extensive board level
leadership roles in both private and public company environments, Gillian
brings a wealth of relevant industry experience across B2B, technology,
advertising and communication sectors. Gillian’s skillset shows particular
strengths in value creation, operational insight and corporate governance,
for which she was recognised in the 2014 UK NED awards. Therefore,
she brings strong experience of governance, public markets and growth
companies.
Current external appointments: Non-Executive Chairman of Peasy.com,
Non-Executive Chairman of Brighter Beauty Group, Non-Executive
Chairman of Bubbles Online Services Ltd., Director of NED Advisory Ltd.,
Director of Board Mentoring Ltd, Director of Sport Mentoring Ltd, Member
of Industrial Development Advisory Board for UK Government.
Time commitment: two to three days per month.
Mickey Kalifa, Independent Non-Executive Director
Term of office: Joined as Non-Executive Director on 5 October 2017; Chair
of the Audit Committee and member of the Remuneration Committee.
Background and suitability for the role: Mickey is a Chartered Accountant
and finance professional with nearly 30 years’ experience across the
technology, media and gaming sectors. Mickey was appointed CFO of M&C
Saatchi plc in March 2019, a LSE listed business. Previously he was CEO of
the betPawa Group and CFO of Sportech plc. where he led a transformation
in the company’s financial strength and played a prominent role in driving
Sportech’s global expansion. He brings a combination of financial expertise,
knowledge of public markets as well as a wide range of sector experience
gained from a career spent in the technology, media and gaming sectors
with some of the world’s largest media and technology companies, including
Liberty Global, BSkyB PLC, Time Warner, Disney and Young and Rubicam.
Current external appointments: CFO of M&C Saatchi plc.
Time commitment: one to two days per month.
Dr. Stuart Green, CEO
Term of office: A co-founder from the group’s inception in 2001, originally in
the role CTO, and appointed CEO on 1 February 2006.
Background and suitability for the role: Stuart brings over 30 years of
experience of team building and executive management in the software
industry to his role as CEO. Stuart established ZOO’s business strategy
and difference in the marketplace by using software technology to deliver
disruptive innovation. With a PhD in Computer Science he brings expertise
in software technology, a track record of innovation having secured over 30
software patents, experience of leading innovative technology businesses
as a result of having co-founded and sold three private software companies,
and experience of capital markets gained from 21 years as a main board
director of AIM-quoted companies.
Current external appointments: Trustee of the registered charity Friends of
the Rowan School and Trustee of the Sheffield Chamber Orchestra.
Time commitment: full time.
Phillip Blundell, CFO
Term of office: Appointed as Chief Financial Officer in July 2018.
Background and suitability for the role: Phill has extensive experience with
AIM listed businesses having worked as an Executive Director for Dot Digital
Group plc, Eagle Eye Solutions Group plc and Intelligent Environments
Group plc. During the 21 years working for AIM listed businesses, he has
floated one business and raised substantial funds to assist the growth
strategies of the businesses. A qualified Chartered Accountant since
1987 with 31 years’ experience in the software and media industries, Phill
brings both financial expertise and sector experience. He has 23 years as
a CFO and Company secretary of AIM listed businesses providing strong
Corporate Governance experience.
Current external appointments: Flamefinch Partners.
Time commitment: full time.
Gordon Doran, Chief Commercial Officer
Term of office: Originally engaged as a commercial consultant in 2005
to establish the group’s US operations and was appointed Commercial
Director on 28 July 2009.
Background and suitability for the role: Gordon has spent his career in
commercial roles with technology businesses in the UK and USA. As Chief
Commercial Officer and President of ZOO’s US operation, Gordon is
responsible for all global operations and has been pivotal in establishing
relationships with a number of large US entertainment companies including
the ‘big six’ Hollywood studios. Based on the West Coast of the USA,
Gordon brings significant experience of sales and marketing in the software
industry since the early 1990s, having held senior positions in a number of
companies, including as COO for Mediostream Inc., and capital markets
experience as a main board director for 10 years.
Current external appointments: None.
Time commitment: full time.
ZOO Digital Group plc Annual Report 2021 Page 39
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
A board evaluation process led by the Chairman took place February 2021. All directors began by completing questionnaires
about the effectiveness of the board and a self-assessment of their own contributions which were returned to the Chairman. The
Chairman then reviewed this information and used it as the basis for an individual discussion with each director, followed by a
collective discussion with the board.
The review considers effectiveness in a number of areas including general supervision and oversight, business risks and trends,
succession and related matters, communications, ethics and compliance, corporate governance and individual contribution.
A number of refinements in working practices were identified as a result of this exercise and have since been adopted.
We will be considering the use of external facilitators in future board evaluations.
As the business expands, the executive directors will be challenged to identify potential internal candidates who could
potentially occupy board positions and set out development plans for these individuals.
Promote a corporate culture that is based on ethical values and behaviours
Our long-term growth is underpinned by our core values which reflect our core brand proposition to make globalising media
content smarter, easier and better:
• Think Smarter
− Inspiration everywhere: We’re always open to learning. From our colleagues, from our customers, even from our
suppliers. When we work together and share ideas, we share success.
− There is no box: When you look at things differently, you’ll find new and creative ways to take on any challenge.
• Make it easier
− We are family: Everyone is heard, everyone is valued. We challenge each other, but it’s done with love and respect.
− Be the customer: We put ourselves in our customers’ shoes to anticipate their future needs and blow their minds.
• Be better
− Daydream believers: Think big and be bold. See a way to change something for the better and then believe you can
make it happen. Remember... disruption favours the brave!
− There’s always a way: Never underestimate the power of determination. From dreaming up new tech to just good old-
fashioned graft. We’ll get the job done.
The culture of the group is characterised by these values which are conveyed regularly to staff through internal communications,
in monthly staff briefings and forums. A staff recognition programme operates on an on-going basis by which any employee can
nominate any of his/her colleagues for a contribution that is in-keeping with the core values. All nominees are recognised at
company-wide staff briefings that in FY21 took place by webinar, presented by executive directors and senior managers. The core
values are communicated to prospective employees in the group’s recruitment programmes and are considered as part of the
selection process.
The board believes that a culture that is based on it’s core values is a competitive advantage and consistent with fulfilment of the
group’s mission and execution of its strategy.
The culture is monitored through the use of a widely used satisfaction and engagement survey that is operated on an annual basis
and to which all permanent staff are invited to contribute. The board reviews the findings of the survey and determines whether
any action is required.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Board provides strategic leadership for the group and operates within the scope of a robust corporate governance
framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and
practices that operate throughout the business, and defining the strategic goals that the group implements in its business
plans. The board defines a series of matters reserved for its decision and has approved terms of reference for its Audit and
Remuneration Committees to which certain responsibilities are delegated. The chair of each committee reports to the board on
the activities of that committee.
The Audit Committee monitors the integrity of financial statements, oversees risk management and control, monitors the
effectiveness of the internal audit function and reviews external auditor independence.
The Remuneration Committee sets and reviews the compensation of executive directors including the setting of targets and
performance frameworks for cash- and share-based awards.
The Executive Board, consisting of the Executive Directors and the US-based Chief Operations Officer, operates as a
management committee, chaired by the CEO, which reviews operational matters and performance of the business, and is
responsible for significant management decisions while delegating other operational matters to individual managers within the
business.
The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the group. She
leads and chairs the board, ensuring that committees are properly structured and operate with appropriate terms of reference,
ensures that performance of individual directors, the board and its committees are reviewed on a regular basis, leads in the
development of strategy and setting objectives, and oversees communication between the group and its shareholders.
The CEO provides coherent leadership and management of the group, leads the development of objectives, strategies and
performance standards as agreed by the board, monitors, reviews and manages key risks and strategies with the board, ensures
that the assets of the group are maintained and safeguarded, leads on investor relations activities to ensure communications and
the group’s standing with shareholders and financial institutions is maintained, and ensures that the board is aware of the views
and opinions of employees on relevant matters.
The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by
the board, making operational and financial decisions required in the day-to-day operation of the group, providing executive
leadership to managers, championing the group’s core values and promoting talent management.
The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their
external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the Executive
Directors and ensure that the group is operating within the governance and risk framework approved by the board.
The Company Secretary is responsible for providing clear and timely information flow to the board and its committees and
supports the board on matters of corporate governance and risk.
The matters reserved for the board are:
• Setting long-term objectives and commercial strategy;
• Approving annual operating and capital expenditure budgets;
• Changing the share capital or corporate structure of the group;
• Approving half year and full year results and reports;
• Approving dividend policy and the declaration of dividends;
• Approving major investments, disposals, capital projects or contracts;
• Approving resolutions to be put to general meetings of shareholders and the associated documents or circulars; and
• Approving changes to the board structure.
The board has approved the adoption of the QCA Code as its governance framework against which this statement has been
prepared and will monitor the suitability of this Code on an annual basis and revise its governance framework as appropriate as
the group evolves.
Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders
In addition to the investor relations activities described above, the following Audit and Remuneration committee reports are
provided.
Audit Committee Report
During the year, the Audit Committee has continued to focus on the effectiveness of the controls throughout the group. The
Audit Committee consists of Mickey Kalifa, chair, and Gillian Wilmot. The committee met twice, and the external auditor and CFO
were invited to attend these meetings. Consideration was given to the auditor’s pre- and post-audit reports and these provide
opportunities to review the accounting policies, internal control and the financial information contained in both the annual and
interim reports. The Committee also met with the auditors with no executives present.
Directors’ Remuneration Policy
This section sets out the Directors’ Remuneration Policy. The Remuneration Committee considers the Remuneration Policy
annually to ensure that it continues to underpin the Group’s strategy.
Key principles
The main aim of the Group’s policy is to align the interests of Executive Directors with the Group’s growth strategy and long-term
creation of shareholder value. The policy is designed to remunerate the Executive Directors competitively and appropriately and
allow them to share in this success and the value delivered to shareholders. The policy is based on the following principles:
• Promote shareholder value creation and support the business growth strategy.
• Ensure that the interests of the Directors are aligned with the long-term interests of shareholders.
• Deliver a competitive level of pay for the Directors sufficient to attract, retain and motivate individuals; and
• Ensure that an appropriate proportion of the package is determined by targets linked to the Group’s performance.
• Ensure the total reward cost to ZOO are affordable and sustainable.
ZOO Digital Group plc Annual Report 2021 Page 41
Component
Purpose and link to strategy
Operation
Maximum
Base salary
To provide a competitive base
salary to attract, motivate
and retain directors with the
experience and capabilities to
achieve the strategic aims.
Reviewed annually against
salary surveys for market
rate, Group performance,
role and experience.
No overall maximum,
however, they are
reviewed to ensure they
are proportionate and
fair when compared
to other salaries in the
Group.
Performance
measure
N/A
Benefits
To provide a market
competitive benefits package
Receive benefits in line
with market practise, these
include death in service
plus health care in the US.
Set a level deemed
appropriate by
the Remuneration
committee
N/A
Pension
To provide an appropriate level
of retirement benefit
Executive Directors are
eligible to participate in the
Group’s pension scheme.
Up to 5% of base salary N/A
Annual bonus
To reward performance against
annual targets which support
the strategic plan.
Awards are made annually
and are paid in cash
Maximum of 100% of
base salary
L-T incentives
Awards are linked to long-
term financial and strategic
objectives. To further promote
equity ownership and long-term
performance, vesting occurs at
the end of a three-year period
with holding periods applying
up to a further seven years.
Awards are made at market
price at date of grant and
with performance targets
that require to be met in the
first 3 years after grant.
No maximum, subject
to not exceeding
the Group’s overall
share based incentive
schemes limit that apply
across all employees
of 15% of issued share
capital.
Minimum of 80%
based on financial
performance
and a maximum
of 20% linked to
smart personal
objectives.
Performance
metrics will be
linked to financial
performance.
Shareholdings
To promote share ownership for
Executive Directors
Executive Directors are
encouraged to build a
shareholding in the Group
over time.
No maximum
N/A
Explanation of performance measures
Performance measures are selected that are aligned with the performance of the Group and the interests of shareholders.
Stretching targets are set each year for the annual bonus and long-term incentive awards. When setting these performance
targets, the Committee will consider several different reference points, which may include the Group’s business plan and strategy
and the economic environment.
The Committee retains the ability to adjust or set different performance measures if events occur which cause the Committee
to determine that the measures are no longer appropriate, and that amendment is required so that they can achieve their original
purpose. Awards and options may be adjusted in the event of a variation of share capital in accordance with the rules of the share
option scheme.
Non-Executive Directors Remuneration Policy
The Remuneration Policy for the Non-Executive Directors is to pay fees necessary to attract an individual of the talent required,
taking into consideration the size of the business and the time commitment of the role. This is reviewed annually by the Group
Chairman and the Chief Executive. The basis of the fees is cash only and Non-Executive Directors do not receive any other
benefits other than reasonable travel and other expenses incurred in the course of performing their duties.
The Company welcomes dialogue with its shareholders over matters of remuneration. The Chairman of the Remuneration
Committee is available for contact with institutional investors concerning the approach to remuneration.
The remuneration committee report is contained on page 45.
By order of the board
Gillian Wilmot
Chairman
Advisers
Company Secretary and Registered Office
Phillip Blundell
ZOO Digital Group plc
7th Floor
City Gate
8 St Mary’s Gate
Sheffield
S1 4LW
Tel: 0114 241 3700
Company no. 03858881
Bankers
HSBC Plc
Carmel House
49 – 63 Fargate
Sheffield
S1 2HD
Nominated advisor and broker
Stifel Nicolaus Europe Limited
150 Cheapside,
London,
EC2V 6ET
Auditor
Grant Thornton UK LLP
1 Holly Street
Sheffield
S1 2GT
Tax advisor
RSM UK Tax and Accounting Limited
25 Farringdon Street
London
EC4A 4AB
Registrar
Share Registrars Limited
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
Solicitors
DLA Piper UK LLP
1 St Paul’s Place
Sheffield
S1 2JX
ZOO Digital Group plc Annual Report 2021 Page 43
Directors’ Report
The directors present their report on the affairs of the group, together with the financial statements and the independent auditor’s
report, for the year ended 31 March 2021.
Principal activities
The principal activity of the group for the year under review was to provide a range of services to allow TV and movie content
to be localised in any language and prepared for sale with all major online retailers and to continue with ongoing research and
development of productivity software in those areas. The principal activity of the company was to act as a holding company for
its trading subsidiaries.
Review of the business and future developments
A review of the development of the business together with an indication of future developments is included in the Chairman’s
Statement and the Strategic Report set out on pages 22 to 28.
The audited financial statements for the year ended 31 March 2021 are set out on pages 57 to 96. The directors do not
recommend the payment of a dividend for the year.
Research and development
The group undertakes research and development into software solutions for media preparation and processing. The aim of the
software developed is to improve efficiencies, therefore reducing time and costs of producing physical and digital products.
Political contributions
During the year the group made no political donations.
Going concern
The directors have prepared trading and cash flow forecasts for the group for the period to 31 March 2023 which show a
continuation of the growth in profitability and cash generation. In line with industry practice in this sector the directors have
had informal indications from major and smaller clients to substantiate a significant proportion of the forecast sales. The
directors have considered the consequences if the sales volume is less than the level forecast and they are confident that, in
this eventuality, alternative steps could be taken to ensure that the group has access to sufficient funding to continue to operate.
The group has a facility with Crestmark Bank which provides invoice financing of up to $2.5m against US clients invoices raised
by ZOO Digital Production LLC. This facility was in place until 7 July 2021. In the UK there is an overdraft facility with a limit of
£250,000 ($345,000) in place with HSBC.
The convertible unsecured loan notes totalling £2.6m ($3.6m) are in place until 31 October 2021. It is believed the loan will be
repaid on or before the maturity date.
The directors believe the assumptions used in preparing the trading and cash flows forecasts to be realistic, and consequently
that the group will continue in operational existence for the foreseeable future. The financial statements have therefore been
prepared on a going concern basis.
Directors
The directors who served during the year were as follows:
Gillian Wilmot
Dr Stuart A Green
Phillip Blundell
Gordon Doran
Mickey Kalifa
Non-Executive Chairman
Chief Executive Officer
Chief Finance Officer
Chief Commercial Officer
Non-Executive Director
Details of the interests in the shares of the company at the beginning or subsequent date of appointment and end of the financial
year of those directors who held office at 31 March 2021 are disclosed in the Directors’ Remuneration report. In accordance with
the company’s Articles of Association, Phillip Blundell and Gillian Wilmot retire by rotation at the next Annual General Meeting
and, being eligible, offers themselves for re-election.
Directors’ indemnities
The group has granted an indemnity to one or more of its directors against liability in respect of any proceedings brought by
third parties, subject to the conditions set out in the Companies Act 2006. The company has purchased and maintains directors’
and officers’ insurance cover against certain legal liabilities and costs for claims in connection with any act or omission by such
director in the execution of their duties.
Financial risk management
The financial risk management is included in the Strategic Report and in note 28.
Substantial shareholdings
At 6 July 2021, the company had been notified, in accordance with sections 791 to 825 of the Companies Act 2006, of the
following interests in the ordinary share capital of the company:
Name of holder
Dr S A Green*
Canaccord Genuity Group Inc
Herald Investment Trust plc
Invesco Ltd
Stonehage Fleming IM Limited LLC
Percentage held
14.00%
11.29%
10.27%
8.51%
4.66%
Number
11,528,764
9,294,270
8,449,269
7,000,000
3,835,489
*Shareholdings of directors include any interests of a “connected person”.
Directors’ responsibilities statement
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have, as
required by the AIM Rules of the London Stock Exchange, elected to prepare the group financial statements in accordance with
International accounting standards in conformity with the requirements of the Companies Act 2006 and have also elected to
prepare the parent company financial statements in accordance with those standards. Under company law the directors must not
approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss
of the company and group for that period.
In preparing these financial statements the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable international accounting standards in conformity with the requirements of the Companies Act
2006 have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the
group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements
and other information included in annual reports may differ from legislation in other jurisdictions.
The names and functions of all the directors are stated on pages 37 and 38.
Disclosure of information to auditor
The directors confirm that:
• so far as each director is aware, there is no relevant audit information of which the company’s auditor is unaware, and
•
the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that the company’s auditor is aware of that information.
Auditor
Grant Thornton UK LLP have expressed their willingness to continue in office. In accordance with Section 489 (4) of the
Companies Act 2006 a resolution to reappoint Grant Thornton UK LLP will be proposed at the Annual General Meeting.
By order of the board
Signed 12th July 2021
Phillip Blundell
Director and Secretary
ZOO Digital Group plc Annual Report 2021 Page 45
Remuneration Committee report
I am pleased to present the remuneration committee report for FY2021, which sets out the remuneration earned and paid to
Directors in the year ended March 2021.
As an AIM listed company, ZOO Digital Group plc is not required to comply with the remuneration reporting requirements
applicable to fully listed companies in the UK. However, the Committee has taken a number of these regulations into account in
the preparation of this report for the year as a matter of best practice.
The work carried out by the Remuneration Committee during the year included the following:
• A review of the performance of the Executive Directors
• A formal review of the scale and structure of their remuneration,
• Reviewing the basis of their service agreements and,
• Reviewing incentive plans and other employment related benefits with due regard to the interests of the shareholders
The Annual report on remuneration, detailed on pages 45 to 48 provides details of the amounts earned in respect of the year
ended 31 March 2021 and how Directors’ Remuneration Policy has operated and will be subject to an advisory shareholder vote at
the 2021 AGM.
Review of the year ended 31 March 2021.
As described earlier in the annual report, the Company has exceeded its financial goals for the year, achieving revenue growth of
33% and more than doubling EBITDA. As a result of this performance the Executive Directors achieved an annual cash bonus of
120% of their on-target earnings which is between 39% and 55% of their base salary.
In the period 500,000 share options held by Gordon Doran vested at a price of 15.25p and 50,000 share options held by Phillip
Blundell vested at a price of 63p. No additional share options held by the Executive Directors vested in the period. In the year
Phillip Blundell was awarded 400,000 share options, Gordon Doran was awarded 110,000 share options, both grants were at the
prevailing market price on the date of grant of 72.5p. These share options have performance targets attached that need to be
attained within 3 years for them to vest. The awards were granted to align Directors interests with the objectives of shareholders.
Outlook for FY2022
The Committee remains committed to a fair and responsible approach to executive pay whilst ensuring it remains in line with
best practice and appropriately incentivises Executive Directors over the longer term to deliver the Group’s strategy. In respect of
the Remuneration policy for FY 2022:
• The committee determined it was appropriate to increase the base salaries of the 3 Executive Directors by an average of
15% to reflect market rates for similar companies and also recognising that there had not been any increases for 3 years.
• After reviewing the annual cash bonus provision, the committee felt it appropriate to increase the on-target earnings
percentage to an average of 54% of base salary. This again mirrors similar schemes at comparable companies.
• The committee determined that it was not appropriate to grant further long-term incentives at this stage. The committee
agreed to review this component of executive pay and make recommendation in the next 12 months.
On behalf of the Board
Chairman of the Remuneration Committee
Directors’ Remuneration Report
Directors’ remuneration report
The directors’ remuneration report is presented as a voluntary disclosure in order to aid the understanding of the financial
statements.
The Remuneration Committee
During the year ended 31 March 2021 the Remuneration Committee consisted of both non-executive directors and was chaired
by Gillian Wilmot.
The Remuneration Committee is responsible for determining the executive directors’ remuneration packages, including bonuses,
share options and other incentive schemes.
Executive directors
The committee aims to ensure compensation is fair and reasonable and that it motivates the executive directors in both the short
and long-term.
The remuneration packages include:
• Basic salary
• Defined contribution to personal pension plans
• Private medical insurance
• Discretionary bonus
• Share options
Non-executive directors
Gillian Wilmot and Mickey Kalifa are paid as employees for their board services.
Directors’ remuneration
Directors’ remuneration for the year to 31 March 2021 is:
Dr Stuart A Green
Gordon Doran
Phillip Blundell
Gillian Wilmot
Mickey Kalifa
Roger D Jeynes**
Helen P Gilder*
Salary
$000
229
300
205
103
33
-
-
870
Bonus
Benefits
Sub total
Pension
$000
$000
236
124
118
-
-
-
-
478
-
25
-
-
-
-
-
25
$000
465
449
323
103
33
-
-
1,373
$000
8
-
-
-
1
-
-
9
2021
Total
$000
473
449
323
103
34
-
-
1,382
Helen Gilder resigned as a director on 8 August 2018*
Roger Jeynes resigned as a director on 1 July 2019**
Of the above, the following directors were remunerated in pound sterling for the year to 31 March 2021. The pound sterling
amounts are shown below:
Salary
£000
Bonus
Sub
total
£000 £000
Pension
£000
175
157
75
25
-
-
432
174
87
-
-
-
-
261
349
244
75
25
-
-
693
6
-
-
1
-
-
7
2021
Total
£000
355
244
75
26
-
-
700
Dr Stuart A Green
Phillip Blundell
Gillian Wilmot
Mickey Kalifa
Roger D Jeynes
Helen P Gilder
Helen Gilder resigned as a director on 8 August 2018*
Roger Jeynes resigned as a director on 1 July 2019**
Gordon Doran is remunerated in US dollars.
2020
Total
$000
292
324
222
5
33
13
12
901
2020
Total
£000
229
174
4
26
10
9
452
One director (2020: one) serving during the year have been members of money purchase pension schemes into which the
company contributes.
The highest paid director received emoluments and benefits as follows:
Emoluments
The highest paid director did not exercise any share options.
2021
$000
473
2020
$000
324
ZOO Digital Group plc Annual Report 2021
Page 47
Directors’ share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the
company granted to or held by the directors. Details of the options are as follows:
Name of
director
Stuart A Green
Stuart A Green
Gordon Doran
Gordon Doran
Gordon Doran
Gordon Doran
Mickey Kalifa
Phillip Blundell
Phillip Blundell
Gillian Wilmot
Gordon Doran
Phillip Blundell
1 April
2020
Granted
during
the year
Exercised
during
the year
Surrend-
ered
during the
year
31 March
2020
Exercise
price ($)
Exercise
price (£)
150,000
175,000
150,000
250,000
1,500,000
1,000,000
30,000
250,000
150,000
50,000
-
-
3,735,000
-
-
-
-
-
-
-
-
-
-
110,000
400,000
510,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000
-
-
-
-
250,000
150,000
175,000
150,000
250,000
1,500,000
1,000,000
30,000
-
150,000
50,000
110,000
400,000
3,995,000
$0.23
$0.20
$0.23
$0.23
$0.20
$0.20
$0.49
$1.61
$0.80
$0.80
$0.89
$0.89
15.00p*
15.25p**
15.00p*
15.00p
15.25p**
15.25p***
37.50p
1.235
63.00p
63.00p
72.5p****
72.5p****
Date
from
which
exercise-
able
Jul-13
Sep-17
Jul-13
Jan-16
Sep-17
Aug-18
Oct-18
Nov-19
Jun-20
Jun-20
May-21
May-21
Expiry
date
Jul-22
Aug-27
Jul-22
Jan-25
Aug-27
Aug-27
Oct-27
Nov-28
Jun-29
Jun-29
May-30
May-30
* The 2012 issue of share options has a vesting condition that the company’s share price must be £0.40 or higher on 20
consecutive business days prior to exercise.
** The 2017 issue of share options has a vesting condition that the company’s share price must be £0.20 or higher for 3 months
immediately prior to exercise.
*** The 1,000,000 share options issued to Gordon Doran in 2017 have a vesting condition relating to the profitability of the group.
**** The share options granted in the year have a vesting condition relating to the profitability of the group.
The exercise of share options granted prior to 31 March 2020 is staggered over the exercise period with typically 40% exercisable
after the first year and a further 30% in each of the next two years.
The charge to profit or loss in respect of directors’ share options amounted to $138,000 (2020: $116,000).
The market price of the ordinary shares at 31 March 2021 was 148 cents (108p) and the range during the year was 168 cents (121.5p)
(high) to 68 cents (51.5p) (low).
Service contracts
The service contracts and letters of appointment of the directors include the terms in the table below.
All the directors are on rolling director appointments and offer themselves for re-election by rotation in accordance with the
company’s Articles of Association.
Upon termination of their service agreement, executive directors are entitled to salary equivalent to their notice period.
Name of director
Executive directors
Dr Stuart A Green
Phillip Blundell
Gordon Doran
Non-executive directors
Gillian Wilmot
Mickey Kalifa
Date of appointment
Notice period
28 January 2000
8 August 2018
28 July 2009
1 July 2019
5 October 2017
12 months
6 months
12 months
3 months
3 Months
Directors’ interests
The directors who held office at 31 March 2021 had the following interests, including any interests of a “connected person”, in the
1p ordinary shares of ZOO Digital Group plc:
Name of director
Gillian Wilmot
Dr Stuart A Green
Phillip Blundell
Gordon Doran
Mickey Kalifa
2021
Beneficial
31,517
11,535,997
75,000
6,033
50,000
2020
Beneficial
31,517
11,528,764
50,000
6,033
50,000
Shares are held on behalf of two of the directors in the long-term incentive plan.
The directors also had the following interest in 7.5% unsecured convertible loan stock at 31 March 2021:
Name of director
Dr Stuart A Green
The value of the convertible loan stock are as follows:
Name of director
Dr Stuart A Green
2021
$000
2020
$000
847
759
2021
£000
2020
£000
615
615
On 10 November 2020 Phillip Blundell purchased 25,000 ordinary shares at 52.9p per share bringing his total holding to 75,000.
No other transactions have taken place with directors.
No changes (other than noted above) took place in the interests of directors between 31 March 2020 and 30 June 2021.
ZOO Digital Group plc Annual Report 2021
Page 49
Independent auditor’s report to the members of ZOO Digital Group Plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of ZOO Digital Group Plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 March 2021 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement
of Changes in Equity, the Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the
Company Statement of Cash Flows and the notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and
international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the
parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31
March 2021 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the
provisions of the Companies Act 2006;
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the
date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a
going concern.
A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of
accounting, and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of our
report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the
financial statements’ section of this report.
Our approach to the audit
Materiality
Key audit
matters
Scoping
Overview of our audit approach
Overall materiality:
Group: $300,000, which represents 0.75% of the group’s revenue at the planning
stage.
Parent company: $225,000, which represents 1% of the parent company’s total asset
balance at planning, capped at component materiality.
Key audit matters were identified as:
• Revenue recognition (Same as previous year); and
• Going concern (Same as previous year)
Our auditor’s report for the year ended 31 March 2020 included no key audit
matters that have not been reported as key audit matters in our current year’s
report.
Audits of the financial information of the component using component materiality
(full scope audits) were performed on all non-dormant UK entities. A combination
of full scope audits and analytical procedures at group level (analytical procedures)
were performed on US entities.
100% of group revenue and 99% profit before tax was subjected to full scope
procedures with 92% of the total asset balance being subject to full scope
procedures.
All audit work was performed by the group engagement team.
Key audit matters
Key audit matters are those matters that, in
our professional judgement, were of most
significance in our audit of the financial
statements of the current period and include
the most significant assessed risks of material
misstatement (whether or not due to fraud) that
we identified. These matters included those
that had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit;
and directing the efforts of the engagement
team. These matters were addressed in the
context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these
matters.
Description
Audit response
KAM
Disclosures
Our results
ZOO Digital Group plc Annual Report 2021 In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
Page 51
Key Audit Matter – Group
Revenue recognition
We identified revenue recognition , including contract assets
and liabilities, as one of the most significant assessed risks of
material misstatement due to fraud.
Revenue is a major driver of the business and under ISA (UK)
240 ‘The Auditor’s Responsibilities Relating to Fraud in an Audit
of Financial Statements’, there is a presumed risk of fraud in
revenue recognition that could result in material misstatements.
Total revenue recognised for the year ended 31 March 2021 was
$39,525,000 (2020: $29,793,000).
Revenue is recognised throughout the group as the fair value
of consideration receivable in respect of the performance of
contracts and the provision of services and is reported under
International Financial Reporting Standard (IFRS) 15) ‘Revenue
from Contracts with Customers’
There is significant judgement in the group’s contract revenue
especially around the contract which are open at the year
end and therefore is susceptible to management bias which
heightens the risk.
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the
following audit procedures:
• assessing whether the revenue recognition policy is in
accordance with IFRS 15 ‘Revenue from Contracts with
Customers’;
• selecting a sample of contract revenue to to determine
whether the contracts have recognised in in accordance
with the group’s accounting policy by;
− confirming that a valid contract existed with the
customer by reference to evidence such as written
agreements;
− challenging whether the identification of the
performance obligations within the contract by
management is appropriate;
− challenging the appropriateness of the transaction
price ascertained by management by reference to
relevant contract(s) and to any assumptions made;
− determining whether the allocation of transaction
price to performance obligations is appropriate;
− challenging whether management’s assessment as
to whether performance obligations have been met,
including the percentage of completion assessment
made by management where performed over time,
is appropriate in light of relevant evidence, including
time records and customer acceptance records;
• agreeing a sample of revenue transactions to either direct
confirmation from the customer or customer payments,
remittances and evidence of performance of the service;
•
testing the design and operating effectiveness of the
relevant controls surrounding revenue recognition for the
group’s main revenue stream by observing the relevant
control log; and
• Analytically reviewing sales, including trend and ratio
analysis comparing results to prior year.
Key Audit Matter – Group
Relevant disclosures in the Annual Report and Accounts
2021
• Financial statements: Note 2, Accounting Policies
• Financial statements: Note 5, Revenue
The group’s accounting policy on revenue, including its
recognition, is shown in note 2 to the financial statements and
related disclosures are included in note 5.
Going Concern
We have identified a key audit matter related to going
concern as one of the most significant assessed risks of
material misstatement as a result of the judgement required
to conclude whether a material uncertainty related to going
concern exists.
Covid-19 and Brexit are also the most significant economic
events for the UK, and at the date of this report there remains
uncertainty in the economy around the post lockdown
restriction. In undertaking their assessment of going concern
for the group the directors considered the impact of Covid-19
and Brexit related events in their forecast future performance
of the group and anticipated cash flows.
In our evaluation of the directors’ conclusions, we considered
the inherent risks associated with the group’s and the parent
company’s business model including effects arising from
macro-economic uncertainties such as Brexit and Covid-19,
we assessed and challenged the reasonableness of estimates
made by the directors and the related disclosures and
analysed how those risks might affect the group’s and the
parent company’s financial resources or ability to continue
operations over the going concern period.
How our scope addressed the matter – Group
Our results
Based on the work we have undertaken we have not found any
material misstatements in revenue recognition.
In responding to the key audit matter, we performed the
following audit procedures:
• obtaining management’s forecasts covering the period to
March 2023, including their assessment of the potential
impact of Covid-19 and considering how these forecasts
were compiled, including assessing their accuracy
by challenging the reasonableness of the underlying
assumptions, and considering whether the assumptions
are consistent with our understanding of the business;
• assessing the reliability of management’s forecasting by
comparing the accuracy of actual financial performance
to the historical forecast information;
• assessing management’s cash and available financing
facilities by assessing the future cash balance and any
significant cash inflows which are included within these
forecasts;
• corroborating post year end eventswhich support the
going concern assumption to relevant documentation
and evaluating of their application in the forecasts for
accuracy;
• performing sensitivity analysis, including a reverse stress
test, on management’s forecasts to determine the
reduction in revenue that would lead to elimination of the
headroom in their original cash flow forecasts;
• obtaining post year end management accounts to
evaluate the impact on trading of the post lockdown
restrictions in the United Kingdom and the United States;
and
• assessing the adequacy of the going concern disclosures
included within the financial statements.
Relevant disclosures in the Annual Report and Accounts
2021
Financial statements: Note 2, accounting policies
Our results
We have nothing to report in addition to that stated in the
‘Conclusions relating to going concern’ section of our report.
We did not identify any additional key audit matters relating to the audit of the financial statements of the parent company which
were not captured in the key audit matters above.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the
auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the nature,
timing and extent of our audit work.
Materiality threshold
$300,000 which is 0.75% of Group revenue
for the year.
$225,000 which is 1% of the total assets of the
parent entity, capped at component materiality.
ZOO Digital Group plc Annual Report 2021 Page 53
Materiality measure
Group
Parent company
Significant judgements
made by auditor in
determining the materiality
In determining materiality, we made the
following significant judgements:
In determining materiality, we made the following
significant judgements:
• Revenue is a key performance indicator
for management as identified within
the Strategic report. We therefore
considered revenue to be the most
appropriate benchmark for the group.
• Total assets is considered the most
appropriate because this is most relevant
performance measure to the stakeholder of
the parent company based on there being no
trade through the parent company.
• We deemed a percentage of 0.75%
to be appropriate based on the
group being listed on AIM and the
performance of the group in the year
has been strong.
Materiality for the current year is higher
than the level that we determined for the
year ended 31 March 2020 to reflect the
improvement in the performance of the
group during the year which has led to the
groups financial position also strengthening.
• The percentage applied was selected
based on the risk profile of the entity as a
component within a listed entity.
Materiality for the current year is higher than the
level that we determined for the year ended 31
March 2020 to reflect the improvement in the
group’s financial performance which was previously
capping the parent company materiality at a lower
level.
Performance materiality
used to drive the extent of
our testing
We set performance materiality at an amount less than materiality for the financial statements as
a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality
threshold
$225,000 which is 75% of financial statement
materiality.
$168,750 which is 75% of financial statement
materiality.
Significant judgements
made by auditor
in determining the
performance materiality
In determining performance materiality,
we assessed the strength of the control
environment, including the effect of
misstatements identified in previous audits,
to make our judgement. Therefore, we
consider the same performance materiality
percentage to be appropriate.
In determining performance materiality, we
assessed the strength of the control environment,
including the effect of misstatements identified in
previous audits, to make our judgement. Therefore,
we consider the same performance materiality
percentage to be appropriate.
.
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
Communication of
misstatements to the
audit committee
Threshold for
communication
We determined a lower level of specific
materiality for the following areas:
Directors’ remuneration
Related party transactions
We determined a lower level of specific materiality
for the following areas:
Directors’ remuneration
Related party transactions
We determine a threshold for reporting unadjusted differences to the audit committee.
$15,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
$11,250 and misstatements below that threshold
that, in our view, warrant reporting on qualitative
grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements based on the final financial information.
Overall materiality – Group
Overall materiality – Parent company
Revenue
$39,525,000
PM
$225,000
75%
FSM
$300,000,
0.76%
TFPUM
$75,000
25%
Total assets
$31,069,000
PM
$168,750,
75%
FSM
$225,000
0.73%
TFPUM
$56,250, 25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in
particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
•
•
the engagement team obtained an understanding of the group and its environment, including group-wide controls, and
assessed the risks of material misstatement at the group level;
the engagement team obtained an understanding of the individual components, including component specific controls, and
assessed the risks of material misstatement at the group level; planning discussions were held between the engagement
team and the group’s management team; and
• walkthroughs were performed on key areas of focus to understand the controls and assess the design effectiveness of
these.
Identifying significant components
• we identified a total of five components within the group of which four were identified as significant components based on
either quantitative or qualitative factors, performing a full-scope audit of the financial statements of the parent company,
and of the financial information of the subsidiary undertakings. Analytical procedures were performed on the other
subsidiary.
Type of work to be performed on financial information of parent and other components (including how it addressed the
key audit matters)
•
•
the engagement team performed a full-scope audit of the financial statements of the parent company, and of the financial
information of the subsidiary undertakings which are subject to a statutory audit; and
the engagement team performed a full-scope audit of the financial statements of the main trading entity within the United
States (ZOO Digital Production LLC) and analytical procedures on the other entity within the United States (ZOO Digital Inc)
Performance of our audit
• we performed a full-scope audit of the financial statements of the parent company, and of the financial information of the
subsidiary undertakings representing all of the group’s operations. The operations that were subject to full-scope audit
procedures made up 100% of consolidated revenues and 99% of total profit before tax. This approach was consistent with
the prior year; and
• 8% of the group’s total asset balance as subject to analytic procedures.
Communications with component auditors
•
there were no component auditors involved in the group audit. All audit work performed by the group auditor.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
ZOO Digital Group plc Annual Report 2021 Page 55
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the
inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be
detected, even though the audit is properly planned and performed in accordance with the ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that
the most significant are the International Accounting Standards in conformity with the requirements of the Companies Act
2006 and other legislative requirements;
• We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience, through discussion with the directors and the Audit
Committee, and from inspection of the group’s board minutes and legal and regulatory correspondence. We discussed the
policies and procedures regarding compliance with laws and regulations across the group with the directors and the Audit
Committee;
• We assessed the susceptibility of the groups‘s consolidated financial statements to material misstatement, including how
fraud might occur by meeting with management from relevant parts of the business to understand where management
considered there was a susceptibility to fraud. We also considered performance targets and their influence on efforts made
by management to manage earnings or influence the perceptions of analysts.
• Audit procedures performed by the engagement team included:
− evaluation of the programmes and controls established to address the risks related to irregularities and fraud;
− testing manual journal entries, in particular journal entries relating to management estimates and entries determined to
be large or relating to unusual transactions; and identifying and testing related party transactions.
•
identifying and testing related party transactions by agreeing to underlying records and obtaining confirmation for directors’
emoluments.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Donna Steel
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Sheffield
12 July 2021
ZOO Digital Group plc Annual Report 2021 Consolidated Statement of Comprehensive Income
Page 57
for the year ended 31 March 2021
Revenue
Cost of sales
Gross Profit
Other operating income
Other operating expenses
Operating profit/(loss)
Analysed as:
EBITDA before share based payments
Share based payments
Depreciation (net of grant)
Amortisation
Exchange (loss)/gain on borrowings
Fair value movement on embedded derivative
Finance cost
Total finance (costs)/income
Loss before taxation
Tax credit
(Loss)/profit and total comprehensive income for the year attributable to
equity holders of the parent
(Loss)/profit per share
basic
diluted
Note
5
6
8
8
8
8
7
7
7
11
13
2021
$000
39,525
(25,882)
13,643
188
(12,869)
962
4,534
(649)
(1,702)
(1,221)
962
(359)
(3,474)
(700)
(4,533)
(3,571)
408
(3,163)
2020
$000
29,793
(19,705)
10,088
252
(10,896)
(556)
2,138
(257)
(1,369)
(1,068)
(556)
197
986
(674)
509
(47)
363
316
(4.24) cents
(4.24) cents
0.42 cents
0.39 cents
The notes on pages 64 to 96 are an integral part of these consolidated financial statements.
Consolidated Statement of Financial Position
as at 31 March 2021
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred income tax assets
Current assets
Trade and other receivables
Contract assets
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Separable embedded derivative
Non-current liabilities
Borrowings
Total liabilities
Net assets
EQUITY
Equity attributable to equity holders of the parent
Called up share capital
Share premium reserve
Foreign exchange translation reserve
Convertible loan note reserve
Share option reserve
Capital redemption reserve
Interest in own shares
Other reserves
Accumulated losses
Attributable to equity holders
Note
14
16
17
18
24
19
23
24
22
22
22
21
21
21
21
21
21
21
21
21
2021
$000
4,362
6,812
486
11,660
8,063
2,178
2,949
13,190
24,850
(9,955)
(813)
(5,032)
(4,452)
(20,252)
(1,759)
(1,759)
(22,011)
2,839
1,010
41,003
(997)
42
2,085
6,753
(46)
12,320
(59,331)
2,839
2020
$000
3,633
6,692
486
10,811
7,302
2,021
1,218
10,541
21,352
(7,313)
(736)
(4,391)
(978)
(13,418)
(2,637)
(2,637)
(16,055)
5,297
1,010
41,003
(992)
42
1,375
6,753
(46)
12,320
(56,168)
5,297
The notes on pages 64 to 96 are an integral part of these consolidated financial statements.
The financial statements on pages 57 to 96 were approved and authorised for issue by the board of directors on 12 July 2021 and
were signed on its behalf.
Stuart A Green
Chief Executive Officer
Phillip Blundell
Chief Finance Officer
ZOO Digital Group plc Annual Report 2021
Company Statement of Financial Position
as at 31 March 2021
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiary undertakings
Amounts due from subsidiary undertakings
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Separable embedded derivative
Non-current liabilities
Borrowings
Total liabilities
Net assets
EQUITY
Equity attributable to equity holders of the parent
Called up share capital
Share premium reserve
Foreign exchange translation reserve
Convertible loan note reserve
Share option reserve
Capital redemption reserve
Interest in own shares
Other reserves
Accumulated losses
Attributable to equity holders
Company registration number: 03858881
Page 59
2020
$000
516
2,282
9,700
13,818
26,316
276
25
301
26,617
(3,879)
(13,033)
(978)
(17,890)
(103)
(103)
(17,993)
8,624
1,010
41,003
(13)
42
1,375
6,753
(4)
10,596
(52,138)
8,624
Note
14
16
25
18
18
19
23
22
22
22
21
21
21
21
21
21
21
21
21
2021
$000
444
2,281
9,700
18,100
30,525
455
89
544
31,069
(8,881)
(13,343)
(4,452)
(26,676)
-
-
(26,676)
4,393
1,010
41,003
(13)
42
2,085
6,753
(4)
10,596
(57,079)
4,393
The company has elected to take the exemption under section 408(2) of the Companies Act 2006 to not present the parent
company Statement of Comprehensive Income.
The loss for the parent company for the year was $4,941,000 (2020: profit of $877,000).
The notes on pages 64 to 96 are an integral part of these consolidated financial statements.
The financial statements on pages 57 to 96 were approved and authorised for issue by the board of directors on 12 July 2021 and
were signed on its behalf.
Stuart A Green
Chief Executive Officer
Phillip Blundell
Chief Finance Officer
Consolidated Statement of Changes in Equity
for the year ended 31 March 2021
Ordinary
shares
Share
premium
reserve
$000
41,003
-
-
-
-
-
$000
1,010
-
-
-
-
-
Foreign
exchange
translation
reserve
$000
(992)
-
-
-
-
-
Convertible
loan note
reserve
Share
option
reserve
Capital
redemption
reserve
Other
reserves
Accu-
mulated
losses
Interest in
own shares
Total
$000
42
-
-
-
-
-
$000
1,085
290
290
-
-
-
$000
6,753
$000
$000
12,320
(58,484)
$000
(53)
$000
2,655
-
-
-
-
-
-
-
-
-
-
-
-
-
316
316
-
-
7
-
-
290
290
7
316
316
1,010
41,003
(992)
42
1,375
6,753
12,320
(56,168)
(46)
5,297
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5)
-
(5)
-
-
-
-
-
-
61
649
710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,163)
(3,163)
-
-
-
-
-
-
61
649
710
(5)
(3,163)
(3,168)
1,010
41,003
(997)
42
2,085
6,753
12,320
(59,331)
(46)
2,839
Balance at 1 April 2019
Share based payments
Transactions with owners
Foreign exchange
translation adjustment
Profit for the year
Total comprehensive
income for the year
Balance at 31 March
2020
Share options exercised
Share based payments
Transactions with owners
Foreign exchange
translation adjustment
Loss for the year
Total comprehensive
income for the year
Balance at 31 March
2021
ZOO Digital Group plc Annual Report 2021
Page 61
Company Statement of Changes in Equity
for the year ended 31 March 2021
Ordinary
shares
Share
premium
reserve
Foreign
exchange
translation
reserve
Convertible
loan note
reserve
Share
option
reserve
Capital
redemption
reserve
Other
reserves
Accumulated
losses
Interest in
own shares
Total
$000
1,010
$000
41,003
$000
(13)
$000
42
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$000
1,085
290
290
-
-
$000
6,753
$000
10,596
$000
(53,015)
$000
(4)
-
-
-
-
-
-
-
-
-
-
877
877
-
-
-
-
$000
7,457
290
290
877
877
1,010
41,003
(13)
42
1,375
6,753
10,596
(52,138)
(4)
8,624
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61
649
710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,941)
(4,941)
-
-
-
-
-
61
649
710
(4,941)
(4,941)
1,010
41,003
(13)
42
2,085
6,753
10,596
(57,079)
(4)
4,393
Balance at 1 April 2019
Share based payments
Transactions with
owners
Profit for the year
Total comprehensive
income for the year
Balance at 31 March
2020
Share options exercised
Share based payments
Transactions with
owners
Loss for the year
Total comprehensive
income for the year
Balance at 31 March
2021
Consolidated Statement of Cash Flows
for the year ended 31 March 2021
Cash flows from operating activities
Operating profit/(loss) for the year
Depreciation
Amortisation and impairment
Share based payments
Changes in working capital:
Increases in trade and other receivables
Increases in trade and other payables
Cash flow from operations
Tax received
Net cash inflow from operating activities
Investing activities
Purchase of intangible assets
Capitalised development costs
Purchase of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Repayment of principal under lease liabilities
Finance cost
Share options exercised
Net cash outflow from financing
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
14
16
16
16
14, 19
19
2021
$000
962
1,715
1,221
649
(918)
2,719
6,348
408
6,756
(67)
(1,274)
(2,290)
(3,631)
(982)
1,043
(1,102)
(414)
61
(1,394)
1,731
1,218
2,949
2020
(restated)
$000
(556)
1,383
1,068
290
(1,220)
860
1,825
363
2,188
(235)
(901)
(509)
(1,645)
(246)
500
(1,044)
(363)
-
(1,153)
(610)
1,828
1,218
The notes on pages 64 to 96 are an integral part of these consolidated financial statements.
ZOO Digital Group plc Annual Report 2021
Company Statement of Cash Flows
for the year ended 31 March 2021
Cash flows from operating activities
Operating (loss)/profit for the year
Depreciation
Amortisation & impairment
Share based payments
Changes in working capital:
Trade and other receivables
Trade and other payables
Cash flow from operations
Tax received/(paid)
Net cash flow from operating activities
Investing Activities
Purchase of property, plant and equipment
Net cash flow from investing activities
Cash flows from financing activities
Repayment of borrowings
Repayment of principle under lease liabilities
Finance cost
Share options exercised
Net cash flow from financing
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Page 63
Note
14
16
14
19
2021
$000
(817)
313
1
649
(4,461)
5,002
687
-
687
(241)
(241)
(64)
(121)
(258)
61
(382)
64
25
89
2020
(restated)
$000
(26)
224
1
290
(374)
445
560
-
560
(238)
(238)
(57)
(109)
(244)
-
(410)
(88)
113
25
The notes on pages 64 to 96 are an integral part of these consolidated financial statements.
Notes to the Financial Statements
for the year ended 31 March 2021
1. General information
ZOO Digital Group plc (‘the company’) and its subsidiaries (together ‘the group’) provide productivity tools and services for
digital content authoring, video post-production and localisation for entertainment, publishing and packaging markets and
continue with on-going research and development in those areas. The group has operations in both the UK and US.
The company is a public limited company which is listed on the AIM Market of the London Stock Exchange and is
incorporated and domiciled in the UK. The address of the registered office is 7th Floor, City Gate, 8 St Mary’s Gate,
Sheffield.
The registered number of the company is 03858881.
The consolidated financial statements are presented in US dollars, the currency of the primary economic environment in
which the company operates (note 2.4.1).
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies
have been applied consistently to all the years presented, unless otherwise stated.
2.1 Basis of preparation and going concern
These financial statements have been prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
The preparation of financial statements in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 requires management to make judgements, estimates and assumptions that
effect the application of policies and reported amounts in the financial statements. The areas involving a higher degree
of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements are
disclosed in note 3.
A separate Statement of Comprehensive Income for the parent company has not been presented as permitted by
section 408 (2) of the Companies Act 2006.
The directors have prepared trading and cash flow forecasts for the group for the period to 31 March 2023 which
show a continuation of the growth in profitability and cash generation. In line with industry practice in this sector the
directors have had informal indications from major and smaller clients to substantiate a significant proportion of the
forecast sales. The directors have considered the consequences if the sales volume is less than the level forecast
and they are confident that, in this eventuality, alternative steps could be taken to ensure that the group has access to
sufficient funding to continue to operate. The group has a facility with Crestmark Bank which provides invoice financing
of up to $2.5m against US clients invoices raised by ZOO Digital Production LLC. This facility was in place until 7 July
2021. In the UK there is an overdraft facility with a limit of £250,000 ($345,000) in place with HSBC.
The convertible unsecured loan notes totalling £2.6m ($3.6m) are in place until 31 October 2021. It is believed the loan
will be repaid on or before the maturity date.
The directors believe the assumptions used in preparing the trading and cash flow forecasts to be realistic, and
consequently that the group will continue in operational existence for the foreseeable future. The financial statements
have therefore been prepared on a going concern basis.
New and revised standards that are effective for annual periods beginning on or after 1 April 2020
There are no new or revised standards that will have a material impact on the Group.
2.1.1
Standards and interpretations in issue at 31 March 2021 but not yet effective and have not yet been
adopted early by the Group
At the date of authorisation of these financial statements, several new, but not yet effective, Standards and
amendments to existing Standards, and Interpretations have been published by the IASB. None of these
Standards or amendments to existing Standards have been adopted early by the Group.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or
after the effective date of the pronouncement. New Standards, amendments and interpretations not adopted
in the current year have not been disclosed as they are not expected to have a material impact on the Group’s
financial statements.
2.2 Consolidation
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity
when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which
control is obtained until the date that control ceases.
The consolidated financial statements of ZOO Digital Group plc include the results of the company and its subsidiaries.
Subsidiary accounting policies are amended where necessary to ensure consistency within the group and intra group
transactions are eliminated on consolidation.
ZOO Digital Group plc Annual Report 2021 Page 65
2.3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting regularly reviewed by the group’s
chief operating decision maker (chief executive) to make decisions about resource allocation to the segments and to
assess their performance.
2.4 Foreign currency translation
2.4.1
Functional and presentation currency
Items included in the financial statements of each of the group’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’). The consolidated
financial statements are presented in US dollars which is the company’s functional and presentation currency.
The functional currency of the company’s subsidiaries is US dollars, therefore the majority of transactions
between the company and its subsidiaries and the company’s revenue and receivables are denominated in US
dollars.
The US dollar/pound sterling exchange rate at 31 March 2021 was 0.726 (2020: 0.809).
2.4.2 Transactions and balances
Transactions in foreign currencies are recorded at the prevailing rate of exchange in the month of the
transaction. Foreign exchange gains or losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at the year end exchange rates
are recognised in the profit/(loss) for the year in the Consolidated Statement of Comprehensive Income.
2.4.3 Group companies
The results and financial position of all group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each entity are translated at the closing rate at the year end date;
• income and expenses for each Statement of Comprehensive Income are translated at the prevailing monthly
exchange rate for the month in which the income or expense arose and all resulting exchange rate differences
are recognised in other comprehensive income with the foreign exchange translation reserve.
2.5 Intangible assets
2.5.1 Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of
the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is
capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to
those cash-generating units that are expected to benefit from the business combination in which the goodwill
arose.
2.5.2 Patent and trademark costs
Patent and trademark costs are stated at cost, net of amortisation and any provision for impairment. Patents and
trademarks have a finite useful life and amortisation is charged to profit or loss on a straight line basis over the
estimated useful economic life which is assessed to be 10 years.
2.5.3 Research and Development costs
Research expenditure is charged to profit or loss in the period in which it is incurred. Development costs are
recognised as an intangible asset if they fulfil the following criteria:
• it is technically feasible to complete the intangible asset so that it will be available for use;
• management intends to complete the intangible asset and use or sell it;
• there is an ability to use or sell the intangible asset;
• it can be demonstrated how the intangible asset will generate probable future economic benefits;
• there are adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset;
• the expenditure attributable to the intangible asset during its development can be reliably measured.
Other development expenditures that do not meet these criteria are recognised as an expense in profit or
loss as incurred. Development costs previously recognised as an expense are not recognised as an asset in a
subsequent period.
Development costs recognised as an intangible asset are amortised on a straight line basis over the estimated
useful life of three years or the length of any current sales contracts, from the point at which the asset is ready
for sale or use.
2.5.4 Computer software
Acquired computer software is shown at historical cost less accumulated amortisation and impairment losses.
Amortisation is charged to profit or loss on a straight-line basis over its estimated useful life of three years from
the date the asset is available for use.
Costs that are directly associated with the development of identifiable and unique software products
controlled by the group, and are expected to generate economic benefits exceeding costs beyond one year,
are recognised as development costs within intangible assets. See note 2.5.3 Research and Development costs.
2.6 Investments in subsidiary undertakings
In the company, investments in subsidiary undertakings are carried at cost less any impairment. The investments are
reviewed on an annual basis for any indication of impairment. The investments are eliminated on consolidation.
2.7 Property, plant and equipment
All property, plant and equipment assets are stated at cost less accumulated depreciation and impairment.
Depreciation is provided on all such assets at rates calculated to write off the cost of each asset less estimated
residual value, on a straight-line basis, over its estimated useful life, as follows:
• Leasehold improvements
• Computer hardware
5 years or over the term of the lease, if shorter
between 2 and 3 years
• Office equipment, fixtures and fittings
between 2 and 5 years
• Production equipment
between 2 and 3 years
ZOO Digital Group plc Annual Report 2021
Page 67
2.8 Impairment of assets
The group assesses at each year end date whether there is any indication that any of its assets have been impaired. If
such indication exists, the asset’s recoverable amount is estimated and compared to its carrying value.
For goodwill, intangible assets that have an indefinite life and intangible assets not yet available for use, the recoverable
amount is estimated at each year end date and whenever there is an indication of impairment an impairment loss is
recognised for the amount by which the asset’s carrying value amount exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
2.9 Financial instruments
The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance of the contractual agreement.
The group monitors its exposure and adopts forward foreign exchange contracts where it deems appropriate and
where commercially viable to hedge its exposure to currency risk.
Financial instruments are recognised in the Statement of Financial Position at fair value when the group becomes a
party to the contractual provisions of the instrument, with movements reflected in profit or loss. The group does not
use hedge accounting for its forward foreign currency contracts and does not use forward foreign currency contracts
for speculative purposes.
2.9.1 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in profit or loss over the period of the borrowings using the effective interest rate method.
The convertible loan notes are accounted for at fair value through profit and loss, in accordance with IFRS 9
“Financial Instruments” and split between debt and equity based upon the market rate of similar loans not
carrying conversion options. Equity movements are recognised in the Convertible loan note reserve.
Amounts due in respect of invoice financing are separately disclosed as current and non-current liabilities. The
group can use these facilities to draw down the value of certain sales invoices. The management and collections
of trade receivables remains with the group.
2.9.2 Trade receivables
Trade receivables are amounts due from clients for provision of services in the ordinary course of business.
They are recognised initially at their fair value and subsequently at their amortised cost using the effective
interest rate method, less provision for impairment.
Impairment of financial assets
The impairment requirement of IFRS 9 uses more forward-looking information to recognise expected credit
losses – the “expected credit loss (ECL) model”. This replaces IAS 39’s “Incurred loss model”. Instruments
within the scope of the new requirements included loans and other debt-type financial assets measured at
amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan
commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through
profit and loss.
Recognition of credit losses is no longer dependent on the group first identifying a credit loss event. Instead
the group considers a broader range of information when assessing credit risk and measuring expected credit
losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that
have low credit risk (Stage 1”) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose
credit risk is not low (“Stage 2”).
“Stage 3” would cover financial assets that have objective evidence of impairment at the reporting date.
“12-month expected credit losses” are recognised for the first category while “lifetime expected credit losses”
are recognised for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses
over the expected life of the financial instrument.
2.9.3 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and deposits held with banks.
2.9.4 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade payables are recorded initially at fair value and subsequently measured at their
amortised cost using the effective interest rate method.
2.10 Share based payments
Options are measured at fair value at grant date using the binomial model. The fair value is expensed on a straight line
basis over the vesting period, based on an estimate of the number of options that will eventually vest.
Under the group’s share option scheme, share options are granted to directors and selected employees. The options
are expensed in the period over which the share based payment vests. A corresponding increase to the share option
reserve under shareholder’s funds is recognised.
When share options are exercised, the company issues new shares. The nominal share value from the proceeds
received are credited to share capital and proceeds received above nominal value, net of attributable transaction
costs, are credited to the share premium when the options are exercised. When share options are forfeited, cancelled
or expire, the corresponding fair value is transferred to the accumulated losses reserve.
The group has no legal or constructive obligation to repurchase or settle the options in cash.
ZOO Digital Group plc Annual Report 2021 Page 69
2.11 Pension costs and other post-retirement benefits
The group operates only defined contribution schemes and pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further obligations once
the contributions have been paid. The amount charged to the Consolidated Statement of Comprehensive Income in
respect of pension costs and other post-retirement benefits is the contributions payable in the period. Differences
between contributions payable in the period and contributions actually paid are shown as either accruals or
prepayments in the Statement of Financial Position.
2.12 Revenue
Revenue arises from the provision of cloud-based localisation and digital distribution services. To determine whether
to recognise revenue, the group follows a 5-step process as follows:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is measured at transaction price, stated net of VAT and other sales related taxes.
Revenue is generally recognised over time as the group satisfies performance obligations by transferring the promised
services to its customers.
2.12.1 Sales of services
Service revenue is recognised in accordance with the transfer of value to the customer and typically this is over
one to four months. Where a project goes over a month end, projects completed but not invoiced are accrued.
At year end projects that have not completed are assessed for the percentage completion and a contract asset
is recognised if appropriate.
The major consideration for ZOO is the timing of revenue recognition and apportionment of costs. The board
believes that the length of projects is short and that the current method of recognising revenues is appropriate
along with apportionment of costs.
All customers are onboarded before any orders can be placed. This includes credit check, account information
and agreement of a customer ratecard. Any customer wishing to place an order sends an email to ZOO
production outlining the project requirements. ZOO production then evaluates the project and sends the
customer a quote. The contract is confirmed either by email or a purchase order request.
The customer reviews the quote and signs off the project by issuing a purchase order or email confirming the
contract. This clearly states the deliverables for the project. There may be multiple performance obligations
in the contract, i.e. More than one service and more than one language. This allows us to identify the individual
obligations within a contract and also where requested make separate deliveries of the localised assets.
Revenue is recognised over time because the performance of the localisation service does not create an asset
with any alternative use to ZOO, and ZOO has an enforceable right to payment for performance completed to
date. Invoices for goods or services transferred are due within 45 days of receipt by the customer.
Having an agreed ratecard with all customers and either an email or purchase order confirming the individual
projects gives certainty to the transaction price and the individual components of the contract. There are no
variable components to ZOO contracts, nor financing or non-cash elements in transaction price.
Where a project is part complete at the end of an accounting period, the percentage completion is estimated
based on reports within ZOO core and ZOO invoicing which use the project status, the customer ratecard
and our supplier ratecard to determine revenue to date and cost to date. This allows revenue and profit to be
allocated across accounting periods.
2.12.2 Software licence fees
Revenue arising from software licences is assessed on a contract by contract basis to identify the performance
obligations included within the contract, and specifically whether the licence is considered to be a distinct
performance obligation. Generally, the contracts include hosting, support, maintenance and other services
which are not distinct from the licence. As the licence is not distinct, the contract is treated as a service
contract, with revenue being recognised over time pro-rata over the period of the contract, as the customer
simultaneously receives and consumes the benefits of the service as ZOO performs it.
In the event that the agreement with the customer does not meet the definition of a contract under IFRS 15,
revenue is recognised when all performance obligations have been fulfilled, and the consideration receivable in
respect of the licence has been received and is non-refundable.
2.13 Leases
The Group as a lessee
For any new contracts entered into the Group considers whether a contract is, or contains a lease. A lease is defined
as “a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time
in exchange for consideration”. To apply this definition the Group assesses whether the contract meets three key
evaluations which are whether:
• The contract contains an identified asset, which is either explicitly identified in the contract or implicitly
specified by being identified at the time the asset is made available to the Group
• The Group has the right to obtain substantially all of the economic benefits from the use of the identified
asset throughout the period of use, considering its rights within the defined scope of the contract
• The Group has the right to direct the use of the identified asset throughout the period of use. The Group
assess whether it has the right to direct “how and for what purpose” the asset is used throughout the period of
use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The
right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct
costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and
any lease payments made in advance of the lease commencement date (net of any incentive received).
The Group depreciates the right-of-use assets on a straight line basis from the lease commencement date to the earlier
of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-
use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid
at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s
incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in
substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is
removed to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients.
Instead of recognising a right-of-use asset and lease liability, the payments in relation to those are recognised as an
expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment and
lease liabilities have been included in trade and other payables.
2.14 Deferred taxation
Deferred tax, including UK corporation tax and foreign tax, is provided in full using the Statement of Financial Position
liability method. Deferred tax is the future tax consequences of temporary differences between the carrying amounts and
tax bases of assets and liabilities shown on the consolidated and parent company Statement of Financial Position. Deferred
tax assets and liabilities are not recognised if they arise in the following situations; the initial recognition of goodwill; or
the initial recognition of assets and liabilities that affect neither accounting nor taxable profit. The amount of deferred tax
provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the year end date.
The group does not recognise deferred tax liabilities, or deferred tax assets, on temporary differences associated with
investments in subsidiaries, joint ventures and associates as it is not considered probable that the temporary differences
will reverse in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. The carrying amount of deferred tax assets is reviewed at each year end date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be
recovered.
2.15 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will
be received and the group will comply with all attached conditions.
Government grants relating to operating costs are deferred and recognised in the Consolidated Statement of
Comprehensive Income over the period necessary to match them with the costs they are intended to compensate.
Government grants relating to property, plant and equipment are credited to the cost of the asset and released to
the Consolidated Statement of Comprehensive Income on a straight line basis over the expected lives of the related
assets.
ZOO Digital Group plc Annual Report 2021 Page 71
2.16 Embedded derivatives
An embedded derivative is a component of a hybrid contract that also includes a non-derivative host – with the effect
that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.
Derivatives embedded in hybrid contracts with a financial asset host within the scope of IFRS 9 are not separated. The
entire hybrid contract is classified and subsequently measured as either amortised cost or fair value as appropriate.
Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of IFRS 9 (e.g.
financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and
characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
If the hybrid contract is a quoted financial liability, instead of separating the embedded derivative, the Group generally
designates the whole hybrid contract at FVTPL.
An embedded derivative is presented as a non-current asset or non-current liability if the remaining maturity of the
hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised
or settled within 12 months.
2.17 Share Options
The Group operates an employee share incentive scheme, namely the Enterprise Management Incentive (the “EMI” and
the share incentive plan (“SIP”).
The total expense for the period relating to employee share-based payment plans have been included in the
consolidated financial statements as the Group exercises control over the EMI in accordance with the terms of the
trust deed.
The Group’s EMI scheme is an equity-settled share option scheme approved by HMRC. Options have also been
granted under the terms of HMRC’s schedule, which is not approved.
Under the EMI scheme the trustees may grant options over shares in the Company to eligible employees. The eligible
employees to whom options are granted and the terms of such options will be determined by the Directors of ZOO or
the trustees. The employees who are eligible to participate in the EMI scheme are all ZOO’s employees, including the
employees of the Company’s subsidiaries. Options are not transferable.
3. Accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
3.1 Critical accounting estimates and assumptions
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Goodwill
Goodwill (detailed in note 16) is tested annually for impairment at the year end date. The recoverable amounts of cash
generating units have been estimated based on value in use calculations. Value in use calculations have been based on
a pre-tax discount rate of 10%. No impairment loss is incurred at this discount rate. Had the discount rate used been 1%
greater or lower than estimated, there still would be no material impact on impairment.
Financial Instruments (note 28)
On initial recognition discounted cash flow analysis is used to determine the fair value of financial instruments that are
not traded on the open market. The non-traded financial instrument is the convertible loan note. Calculations have
been based on a post-tax discount rate of 8.5%.
The separable embedded derivative fair value is estimated using a quantitative model based on that described in
K.Tsiveriotis and C Fernandes. This uses option-pricing techniques to model the value of the convertible instruments
based on parameters such as the credit spread on the company’s debt instruments, the volatility and price of the
company’s shares. The valuation methodology requires the input of several judgemental assumptions.
Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable
taxable profits will be available in the future against which the reversal of temporary differences can be deducted.
Where the temporary differences related to unused tax losses, evidence considered to support the recognition of
deferred tax assets include the existence of relevant taxable profits in the current and preceding periods and in the
period after the reporting date and expectations of profits in the future. Recognition therefore involves judgement
regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has
been recognised.
Accounting estimates for the useful lives of property, plant and equipment and intangible assets are included within the
relevant accounting policies above.
3.2 Critical judgements in applying the group’s accounting policies
Functional currency of the company
The functional currency of the company’s largest subsidiaries is US dollars. Therefore, as the majority of transactions
between the company and these subsidiaries and the company’s revenue and receivables are denominated in US
dollars, management have determined that the company’s functional and presentation currency is US dollars.
Identification of performance obligations
The determination of the number of distinct performance obligations in a contract requires judgement, based on
whether the customer can benefit from the use of the service on its own or together with other resources that
are readily available to it, and also whether the promise to transfer the service is separately identifiable from other
promises in the contract. As explained in the accounting policy for revenue, our contracts usually include just one
distinct performance obligation.
Allocation of the transaction price to performance obligations
Where a contract contains multiple performance obligations, the transaction price is required to be allocated to the
different performance obligations. Wherever possible the transaction price is allocated on a stand-alone selling price
basis, by reference to the agreed customer ratecard. In the event that this is not available, the price is allocated to the
various performance obligations on a reasonable basis, with reference to other ratecards, the expected time involved
in performing the service, and management’s experience of similar projects.
ZOO Digital Group plc Annual Report 2021 Page 73
4. Segmental reporting
Operating segments
At 31 March 2021, the group is organised on a worldwide basis into three main operating segments:
• Localisation, including subtitling and dubbing along with all associated services
• Digital packaging
• Software solutions, including research, development, consultancy and software sales
These divisions are the basis on which the group reports its segment information and manages the business. Although there
is overlap and interconnectivity between the segments the dynamics and growth prospects differ from one another so it
is appropriate that they are separately identified. The categories identified also depict how the nature, amount, timing and
uncertainty of revenue and cashflows are affected by economic factors.
The segment results are as follows:
Localisation
Media services
Software solutions
Total
Total revenue
Inter-segment revenue
Revenue
Segment contribution
Unallocated cost of sales
Gross profit
Unallocated corporate expense
Operating Profit/(loss)
Finance cost
Loss before taxation
Tax on profit
(Loss)/profit for the year
2021
$000
23,699
(3,438)
20,261
2,946
2020
$000
23,296
(2,545)
20,751
4,685
2021
$000
17,466
-
17,466
11,365
2020
$000
7,411
-
7,411
5,460
2021
$000
1,798
-
1,798
1,693
2020
$000
1,631
-
1,631
1,528
2021
$000
42,963
(3,438)
39,525
16,004
(2,361)
13,643
2020
$000
32,338
(2,545)
29,793
11,673
(1,585)
10,088
(12,681)
(10,644)
962
(4,533)
(3,571)
408
(3,163)
(556)
509
(47)
363
316
Geographical areas
The group’s operating divisions operate in two principal geographical areas of the world, the UK and the US. All European
operations are run from the UK office.
United Kingdom (domicile)
US
Revenue
Total assets
Non-current assets
2021
$000
5,492
34,033
39,525
2020
$000
4,470
25,323
29,793
2021
$000
12,168
12,682
24,850
2020
$000
12,237
9,115
21,352
2021
$000
4,479
7,181
11,660
2020
$000
3,886
6,925
10,811
At 31 March 2021, contract assets amounted to $2.2m (2020: $2.0m) and contract liabilities amounted to $0.8m (2020: $0.7m).
Revenue for the year ended 31 March 2021 includes $0.7m (2020: $0.8m) included in the contract liability balance at the beginning
of the period.
The group has taken advantage of the practical expedient permitted by IFRS 15, and has therefore not disclosed the amount of
the transaction price allocated to unsatisfied performance obligations or when it expects to recognise that revenue, as contracts
have an expected duration of less than one year.
5. Revenue
All revenue is derived from continuing operations
The group’s revenue comprises:
Service revenue
Licence revenue
The group’s revenue disaggregated by primary geographical markets is as follows:
2021
$000
37,727
1,798
39,525
United Kingdom
USA
Europe
Other countries
United Kingdom
USA
Europe
Other countries
For the year ended 31 March 2021
Licensing
$’000
Service
$’000
1,223
34,791
1,006
707
37,727
45
1,741
-
12
1,798
For the year ended 31 March 2020
Licensing
$’000
Service
$’000
2,203
24,917
445
597
28,162
58
1,573
-
-
1,631
The group’s revenue disaggregated by pattern of revenue recognition is as follows:
Services transferred over time
Services transferred over time
For the year ended 31 March 2021
Licensing
$’000
1,798
1,798
Service
$’000
37,727
37,727
For the year ended 31 March 2020
Licensing
$’000
1,631
1,631
Service
$’000
28,162
28,162
2020
$000
28,162
1,631
29,793
Total
$’000
1,268
36,532
1,006
719
39,525
Total
$’000
2,261
26,490
445
597
29,793
Total
$’000
39,525
39,525
Total
$’000
29,793
29,793
Major clients
The group has two major customers contributing 72% and 4% (2020: 56% and 10%) of the group’s revenue respectively. The
debtor receivable balance as at 31 March 2021 for the two largest clients was $1.6m. The revenues are as follows:
Largest two clients
Other clients
2021
$000
30,077
9,448
39,525
2020
$000
19,608
10,185
29,793
ZOO Digital Group plc Annual Report 2021
6. Other operating income
Grant Funding (MAUDIE grant from Innovate UK)
Other operating income
7. Finance costs/income
Interest on borrowings
Interest on IFRS16 Lease liabilities
Fair value movement on embedded derivative
Exchange loss/(gain) on borrowings
Finance costs
Page 75
2021
$’000
188
188
2021
$’000
452
248
700
3,474
359
4,533
2020
$’000
252
252
2020
$’000
384
290
674
(986)
(197)
(509)
The fair value movement on the embedded derivative is a non-cash charge based on the valuation of the separate
economic items within the convertible loan note agreement which have been classed as embedded derivatives. This is
explained more fully in note 22.
8. Operating profit/loss
Group operating profit/loss for the year is stated after charging/ (crediting) the following:
Other exchange losses/(gains)
Staff costs
Capitalised staff costs
Share based payment
Depreciation
Grant release re tangible fixed assets
Amortisation of other intangible assets
Research and non-capitalised development costs
Auditor’s remuneration
Other expenses
Other operating expenses
9. Auditor’s remuneration
Fees payable to the company’s auditor for the audit of the company’s financial statements
Fees payable to the company’s auditor and its associates for other services:
The audit of subsidiary financial statements
Audit-related assurance services
2021
$000
96
7,025
(1,274)
649
1,715
(13)
1,221
320
91
3,039
12,869
2021
$000
69
18
4
91
2020
$000
(9)
5,764
(901)
257
1,383
(14)
1,068
566
77
2,705
10,896
2020
$000
55
18
4
77
10. Employees including directors
The average number of employees (including executive directors) was:
Product design and service delivery
Sales and marketing
Administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Group
2021
No.
225
9
16
250
Group
2021
$’000
16,926
1,177
200
649
18,952
2020
No.
182
9
14
205
2020
$000
12,581
990
168
257
13,996
Company
2021
No.
62
5
10
77
Company
2021
$’000
2,011
144
95
574
2,824
2020
No.
45
4
9
58
2020
$000
1,281
121
78
150
1,630
The group pension arrangements are operated through a defined contribution scheme.
Compensation of key management personnel (including directors)
Short-term employee benefits
Cost of defined benefit scheme pensions
Share based payments
Group
2021
$000
1,739
9
211
1,959
2020
$’000
1,228
9
120
1,357
Company
2021
$000
924
9
137
1,100
2020
$’000
564
8
116
688
This includes all directors listed on pages 37 and 38 and senior management.
Directors’ remuneration for the year to 31 March 2021 is:
Salary
$000
Bonus
$000
Benefits
Pension
$000
$000
229
-
300
205
-
33
103
870
236
-
124
118
-
-
-
478
-
-
25
-
-
-
-
25
8
-
-
-
-
1
-
9
2021
Total
$000
473
-
449
323
-
34
103
1,382
2020
Total
$000
292
12
324
222
13
33
5
901
Dr Stuart A Green
Helen P Gilder***
Gordon Doran
Phillip Blundell
Roger D Jeynes**
Mickey Kalifa
Gillian Wilmot*
*appointed 1 July 2019
**resigned 1 July 2019
***resigned 8 August 2018
Two directors (2020: two) serving during the year have been members of money purchase pension schemes into which the
company contributes.
ZOO Digital Group plc Annual Report 2021
The highest paid director received emoluments and benefits as follows:
Emoluments
11. Income tax
Current tax:
UK corporation tax
- Research and development tax credit
Foreign tax
Total current tax
Total deferred tax
Tax credited
Corporation tax is calculated at 19% (2020: 19%) of the estimated assessable profit for the year.
Tax charge for the year
The tax charge for the year can be reconciled to the loss for the year as follows:
Loss before tax
Tax calculated at standard rate of corporation tax of 19% (2019: 19%)
Research and development tax credit
Deducted from losses brought forward
Tax credited
Page 77
2021
$000
473
2021
$000
408
-
408
-
408
2021
$000
(3,571)
(678)
408
678
408
2020
$000
324
2020
$000
376
(13)
363
-
363
2020
$000
(47)
(9)
376
(4)
363
Tax losses carried forward
The group has tax losses carried forward of approximately $45.7m (2020: $42m), of which $3.4m (2020: $2.8m) has been
recognised at a rate of 19% as a deferred tax asset for the year. The balance of tax losses remain unrecognised at the
balance sheet date due to the uncertainty in the timing of future profits. The tax rate will increase from 19% to 25% from 1
April 2023.
12. Dividends
There were no dividends paid or proposed.
13. (Loss)/profit per share
Earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the year.
(Loss)/profit for the financial year
Weighted average number of shares for basic & diluted (loss)/profit per share
Basic
Effect of dilutive potential ordinary shares:
Convertible loan note
Share options
Diluted
Basic and Diluted
2021
$000
(3,163)
2020
$000
316
2021
Number of
shares
2020
Number of
shares
74,597,495
74,487,534
-
-
74,597,495
-
6,729,240
81,216,774
Basic
Diluted
2021
Cents
(4.24)
(4.24)
2020
Cents
0.42
0.39
The convertible debt has not been included in the 2021 or 2020 diluted earnings per share calculations due to being anti-
dilutive.
In 2021, the share options have been excluded from the diluted EPS calculation due to these being anti-dilutive and the
Group incurred a loss in the year.
14. Property, plant and equipment
Group
Cost
Opening cost at 1 April 2019
Adjustment on transition to IFRS 16
Additions
Opening cost at 1 April 2020
Additions – ROU assets
Additions - owned
Closing cost at 31 March 2021
Accumulated depreciation
Opening balance at 1 April 2019
Depreciation
Opening balance at 1 April 2020
Depreciation
Closing balance at 31 March 2021
Opening carrying value at 1 April 2019
Opening carrying value at 1 April 2020
Closing carrying value at 31 March 2021
Production
equipment
Leasehold
improvements
Computer
hardware
Total
Office
equipment,
fixtures &
fittings
$000
$000
$000
$000
$000
509
-
152
661
-
182
843
504
19
523
105
628
5
138
215
629
3,563
92
4,284
154
22
4,460
341
952
1,293
1,013
2,306
288
2,991
2,154
2,937
-
243
3,180
-
2,045
5,225
2,317
397
2,714
582
3,296
620
466
1,929
128
-
22
150
-
41
191
97
15
112
15
127
31
38
64
4,203
3,563
509
8,275
154
2,290
10,719
3,259
1,383
4,642
1,715
6,357
944
3,633
4,362
Included in the net carrying amount of Leasehold Improvements are right-of-use assets of $1,966,000 (2020: $2,712,000)
ZOO Digital Group plc Annual Report 2021
Company
Cost
Opening cost at 1 April 2019
Adjustment on transition to IFRS 16
Additions
Opening cost at 1 April 2020
Additions
Closing cost at 31 March 2021
Accumulated depreciation
Opening balance at 1 April 2019
Depreciation
Opening balance at 1 April 2020
Depreciation
Closing balance at 31 March 2021
Opening carrying value at 1 April 2019
Opening carrying value at 1 April 2020
Closing carrying value at 31 March 2021
Page 79
Leasehold
improvements
Computer &
Production
hardware
Office
equipment,
fixtures &
fittings
Total
$000
$000
$000
$000
311
248
56
615
6
621
152
157
309
174
483
159
306
138
234
-
180
414
235
649
148
61
209
136
345
86
205
304
74
-
2
76
-
76
65
6
71
3
74
9
5
2
619
248
238
1,105
241
1,346
365
224
589
313
902
254
516
444
2020
$000
164
103
164
Included in the net carrying amount of leasehold improvements are right-of-use assets of $51,000 (2020: $155,000)
15. Leases
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-current
Group
Company
2021
$000
1,506
1,759
3,265
2020
$000
1,223
2,137
3,360
2021
$000
116
-
116
The Group has leases for offices in Sheffield, London, California and IT equipment. Each lease is reflected on the balance
sheet as a right-of-use-asset and a lease liability. The Group classifies its right-of-use-assets in a consistent manner to its
property, plant and equipment (see Note 14).
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to
another party, the right-of-use-asset can only be used by the Group. Leases are either non-cancellable or may only be
cancelled by incurring a substantive termination fee. Some leases contain an option to purchase the underlying leased asset
outright at the end of the lease, or to extend the lease for a further term. The Group is prohibited from selling or pledging
the underlying leased assets as security. For leases over office buildings the Group must keep those properties in a good
state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure
items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts.
The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognised on the
balance sheet:
No of
right-of-use
assets
Range of
remaining
term
Average
remaining
lease term
No of
leases with
extension
options
No of
leases with
options to
purchase
No of
leases with
termination
options
No of
leases with
variable
payments
linked to an
index
Right-of-use-asset
Office building
IT equipment
4
-
1-4 years
-
2 years
-
-
-
-
-
-
-
-
-
The lease liabilities are secured by the related underlying assets. Future minimum lease payments as at 31 March 2021 were
as follows:
31 March 2021
Lease payments
Finance charges
Net present values
31 March 2020
Lease payments
Finance charges
Net present values
Within 1
year
1-2 years
2-3 years
3-4 years
4-5 years
$’000
$’000
$’000
$’000
$’000
After 5
years
$’000
1,733
(116)
1,617
1,296
(39)
1,257
1,580
(55)
1,525
1,220
(19)
1,201
563
(5)
558
1,088
(6)
1,082
45
-
45
374
-
374
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
3,921
(176)
3,745
3,978
(64)
3,914
Lease payments not recognised as a liability
The group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such leases are expensed on a straight line basis. In addition,
certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred.
The expense relating to payments not included in the measurement of the lease liability amounted to $12,000 for leases of
low value assets. (2020: $6,000).
At 31 March 2021 the total commitment was $26,000. (2020: $4,000).
Total cash outflow for leases for the year ended 31 March 2021 was $1.6 million (2020 $1.2 million).
Group
Tangible assets for the group includes the following amounts where the company is a lessee:
At 31 March 2021
Production
equipment
Leasehold
improvements
Computer
hardware
Cost - capitalised leases
Accumulated depreciation
Net book value
At 31 March 2020
Cost - capitalised leases
Accumulated depreciation
Net book value
$000
298
(159)
139
$000
4,086
(2,080)
2,006
$000
2,815
(2,066)
749
Production
equipment
Leasehold
improvements
Computer
hardware
$000
131
(131)
-
$000
3,932
(1,125)
2,807
$000
1,940
(1,802)
138
$000
26
(26)
-
Office
equipment,
fixtures &
fittings
$000
26
(26)
-
Office
equipment,
fixtures &
fittings
Total
$000
7,225
(4,331)
2,894
Total
$000
6,029
(3,084)
2,945
ZOO Digital Group plc Annual Report 2021
Page 81
The group leases various equipment under non-cancellable lease agreements. The lease terms are between three and five
years.
Company
Tangible assets for the company includes the following amounts where the group is a lessee:
At 31 March 2021
Cost - capitalised leases
Accumulated depreciation
Net book value
At 31 March 2020
Cost - capitalised leases
Accumulated depreciation
Net book value
Leasehold
Improvements
Computer
hardware
$000
525
(434)
91
$000
20
(20)
-
Leasehold
Improvements
Computer
hardware
$000
525
(275)
250
$000
20
(20)
-
Total
$000
545
(454)
91
Total
$000
545
(295)
250
16. Intangible assets
Group
Cost
Opening cost at 1 April 2019
Additions
Opening cost at 1 April 2020
Additions
Closing cost at 31 March 2021
Accumulated amortisation
Opening balance at 1 April 2019
Amortisation
Opening balance at 1 April 2020
Amortisation
Closing balance at 31 March 2021
Opening carrying value at 1 April 2020
Closing carrying value at 31 March
2021
Goodwill
$000
16,610
-
16,610
-
16,610
12,620
-
12,620
-
12,620
3,990
3,990
Development
costs
$000
Patents and
trademarks
$000
Computer
software
$000
11,408
901
12,309
1,274
13,583
8,984
990
9,974
1,116
11,090
2,335
2,493
651
42
693
46
739
469
48
517
38
555
176
184
605
193
798
21
819
577
30
607
67
674
191
145
Total
$000
29,274
1,136
30,410
1,341
31,751
22,650
1,068
23,718
1,221
24,939
6,692
6,812
Development costs are internally generated software development costs. All other intangible assets are acquired externally.
The remaining life of the majority of development costs is 5 years.
No patent applications were derecognised during the year (2020: nil).
No intangible assets were impaired during the year (2020: nil).
ZOO Digital Group plc Annual Report 2021
Company
Cost
Opening cost at 1 April 2020
Closing cost at 31 March 2021
Accumulated amortisation/ impairment
Opening balance at 1 April 2020
Amortisation
Closing balance at 31 March 2021
Opening carrying value at 1 April 2019
Opening carrying value at 1 April 2020
Closing carrying value at 31 March 2021
Page 83
Goodwill
Computer
software
Total
$000
$000
$000
10,960
10,960
8,679
-
8,679
2,281
2,281
2,281
14
14
13
1
14
2
1
-
10,974
10,974
8,692
1
8,693
2,283
2,282
2,281
Impairment tests for goodwill
Goodwill is subject to annual impairment testing, or more frequently if there are indications that goodwill might be
impaired. Goodwill is allocated to the group’s cash generating units (CGUs) identified according to the operating segment.
The aggregation of assets for identifying the cash generating units has not changed since the prior year.
The recoverable amount of a CGU has been determined based on its value in use. In calculating the value in use the group
used a pre-tax discount rate of 10% (2020: 10%). The carrying amount of goodwill is allocated as follows:
Software solutions
Media production
2021
$000
2,281
2020
$000
2,281
2021
$000
1,709
2020
$000
1,709
Group
2021
$000
3,990
2020
$000
3,990
Within the company the goodwill is the software solutions portion.
Following the impairment tests, goodwill was considered not to be impaired in either the group or the company.
Management has based its pre-tax cash flow projections on financial budgets approved by the Board covering the next
financial period. These are based on its expectations of prices, volumes and margin obtained from its current products and
services and products and services development. Cash flows after this period have been extrapolated based on estimated
growth rates and discount rates disclosed below for each segment over the next five years. The discount rate has been
calculated for each CGU and is considered to reflect the risks specific to the asset as well as the time value of money.
Discount rate
Growth rate
Software solutions
Media production
10%
3%
10%
3%
The risks associated with each CGU are considered to be similar, therefore it is appropriate to use the same discount rate
for each.
Management has based the growth rate of 3% on its expectations of prices, volumes and margin obtained from its current
products and services and products and services under development. Current estimates from clients and market trends
would support a higher growth rate but management have adopted a cautious assumption when assessing any potential
impairment and are therefore considered a “worse case” scenario. The pre-tax discount rate of 10% is what management
consider to be its cost of obtaining funds.
If sector growth assumption rates were applied at 3% and a discount rate of 10% was applied, the software solutions
segment and the media production segment would require no impairment.
If sector growth assumption rates were applied at 0% and a discount rate of 10% was applied, the software solutions
segment and the media production segment would require no impairment.
If sector growth assumption rates were applied at 0% and a discount rate of 15% was applied, the software solutions
segment and the media production segment would require no impairment.
17. Deferred income tax
Deferred tax assets comprise:
Unused tax losses
Group
2021
$000
486
The gross movement on the deferred income tax account is as follows:
At 31 March 2020 and 31 March 2021
Group
2021
$000
486
2020
$000
486
2020
$000
486
Company
2021
$000
-
Company
2021
$000
-
2020
$000
-
2020
$000
-
Tax losses carried forward
The group has tax losses carried forward of approximately $45.7m (2020: $42m), of which $3.4m (2020: $2.8m) has been
recognised at a rate of 19% as a deferred tax asset for the year. The balance of tax losses remains unrecognised at the
balance sheet date due to the uncertainty of the ability to offset against future profits. The tax rate will increase from 19 to
25 percent from 1 April 2023.
18. Trade and other receivables
Trade receivables
Less: allowance for impairment of trade receivables
Trade receivables - net
Amounts owed by subsidiary undertakings
Other debtors
Prepayments
Less non-current portion: amounts owed by subsidiary
undertakings
Current portion
Group
2021
$000
7,101
(29)
7,072
-
312
679
8,063
-
8,063
2020
$000
6,250
(11)
6,239
-
585
478
7,302
-
7,302
Company
2021
$000
-
-
-
18,160
82
313
18,555
(18,100)
2020
$000
-
-
-
13,872
47
175
14,094
(13,818)
455
276
The fair values of trade and other receivables equal their carrying amounts.
As of 31 March 2021, trade receivables of $467,000 (2020: $1,477,000) were overdue. The ageing analysis of these trade
receivables is as follows:
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
Group
2021
$000
553
149
(132)
(103)
467
2020
$000
838
716
(42)
(35)
1,477
There were no trade receivables outstanding in the company at 31 March 2021 or 31 March 2020.
All of the group’s trade and other receivables have been reviewed for indicators of impairment. Trade receivables were
found to be impaired and a loss allowance for lifetime credit losses $29,000 (2020: $11,000) has been recorded accordingly.
ZOO Digital Group plc Annual Report 2021
The carrying amounts of trade and other receivables are denominated in the following currencies:
Group
2021
$000
855
8,256
17
47
-
-
1,066
10,241
2020
$000
381
7,693
33
161
164
43
848
9,323
Pound sterling
US Dollar
Hong Kong dollar
Japanese Yen
Mexican Peso
Polish Zloty
Euro
Allowance for impairment of trade receivables:
At 1 April 2020
Allowance for receivables impairment
Receivables written off in the year
At 31 March 2021
Page 85
Company
2021
$000
327
18,228
-
-
-
-
-
18,555
Group
2021
$000
11
18
-
29
2020
$000
210
13,884
-
-
-
-
-
14,094
2020
$000
-
11
-
11
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables, other debtors and cash
and cash equivalents. The group does not hold any collateral as security.
The directors believe that a reasonable provision has been made for outstanding amounts, or values impaired and expected
credit losses and, when taking into consideration the historic rate of impairment, the remaining un-provided amounts are
considered to be recoverable.
The amounts owed by the subsidiary undertakings to the parent company have no payment terms and bear no interest, but
they are considered to be recoverable in the future.
19. Notes to the cash flow statement
19.1 Significant non-cash transactions
During the year the group acquired property, plant and equipment and computer software with a cost of $2,290,000
(2020: $509,000) of which $1,043,000 (2020: $nil) was acquired by the means of a lease.
19.2 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents included in
the cash flow statement comprise the following consolidated and parent company statement of financial position
amounts.
Cash on hand and balances with banks
Group
2021
$000
2,949
2020
$000
1,218
Company
2021
$000
89
2020
$000
25
The fair values of the cash and cash equivalents are considered to be their book value.
20. Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
1 April 2020
Cash-flows
- Repayment
- Proceeds
Non-cash
- Fair value
- Reclassification
31 March 2021
Long-term
borrowings
$000
3,960
Short-term
borrowings
$000
260
Embedded
derivative
$000
978
Lease
liability
$000
2,808
(925)
717
358
-
4,110
(58)
326
-
-
528
-
-
3,474
-
4,452
(809)
-
-
154
2,153
Total
$000
8,006
(1,792)
1,043
3,832
154
11,243
The financial instrument met the 10% change in future cash flows in the year and was there extinguished and re-recognised.
1 April 2019
Cash-flows
- Repayment
- Proceeds
Non-cash
- Fair value
- Converted
- Reclassification
31 March 2020
Long-term
borrowings
$000
3,899
Short-term
borrowings
$000
248
Embedded
derivative
$000
1,965
Lease
liability
$’000
-
(246)
500
(181)
-
(12)
3,960
-
-
-
-
12
260
-
-
(987)
-
-
978
(754)
-
-
-
3,562
2,808
Total
$000
6,112
(246)
500
(1,168)
-
2,808
8,006
The 2020 cashflow balances have been re-stated to more accurately reflect the treatment of IFRS 16. There is no impact on
the opening and closing reserves from the restatement as it is just reclassification within the cashflow.
ZOO Digital Group plc Annual Report 2021 21. Share capital and reserves for Group and Company
Called up share capital
Allotted, called-up and fully paid
74,837,271 (2020: 74,547,271) ordinary shares of 1p each
Reconciliation of the number of ordinary shares outstanding:
Opening balance
Share options exercised
Closing balance
Page 87
2021
$000
1,010
2020
$000
1,010
74,547,271
290,000
74,837,271
74,424,771
122,500
74,547,271
Reserves
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Share premium reserve
Foreign exchange translation
reserve
Convertible loan note reserve
Share option reserve
Capital redemption reserve
Description and purpose
Represents the amount subscribed for share capital in excess of the nominal value.
Cumulative exchange differences resulting from translation of foreign operations into
the reporting currency.
Represents the equity element of the convertible loan note.
Cumulative cost of share options issued to employees.
Represents 32,660,660 deferred shares of 14p each created during the share
reorganisation on 4 May 2017.
Other reserves
Created as part of the reverse takeover between Kazoo3D plc and ZOO Media
Corporation Ltd in 2001.
Accumulated losses
Cumulative net losses recognised in profit or loss.
22. Borrowings
Non-current
7.5% Unsecured convertible loan note stock
Right of use asset liability
Other bank borrowings
Lease liabilities
Current
7.5% Unsecured convertible loan note stock
Amounts owed to subsidiary undertakings
Lease liabilities
Right of use asset liability
Borrowings
Separable embedded derivative
Total borrowings
Group
2021
$000
-
1,175
-
584
1,759
3,526
-
528
4,054
978
5,032
4,452
11,243
2020
$000
-
1,845
500
292
2,637
3,168
-
260
3,428
963
4,391
978
8,006
Company
2021
$000
-
-
-
-
-
3,526
9,701
44
13,271
72
13,343
4,452
17,795
2020
$000
-
59
-
44
103
3,168
9,701
64
12,933
100
13,033
978
14,114
The loan notes pay a coupon of 7.5% and the loan stock holder is entitled, before the redemption date of 31 October 2021,
to convert all or part of the loan stock into fully paid ordinary shares on the basis of one ordinary share for every £0.48 of
principal amount of loan stock. The US dollar value of the loan notes at 31 March 2021 was $3,526,000 (2020: $3,168,000). On
the 13 July 2020, it was approved by the Board of ZOO digital group plc and the loan noteholders to extend the redemption
date of the loan notes by 1 year to 31 October 2021. All other terms of the loan notes remain the same.
The restructured convertible loan stock has two separate economic components within it; the holder is entitled to convert
the loan note into equity at any point and the company is entitled to convert the loan note into equity if the 30 business
day trailing average share price is above the level of £2.50 per share. In both instances the conversion is on the basis of one
ordinary share for every £0.48 of principal amount of loan stock. As at 31 March 2021, an independent valuation has been
undertaken to measure the fair value of the two separate components as at the balance sheet date. For the year ended
31 March 2021 the valuation of the embedded derivatives resulted in a non-cash charge totalling $3,474,000 (2020: credit
$987,000) which has an underlying value of $4,452,000. (2020: $978,000)
The group has an arrangement with Crestmark Bank to provide an invoice financing facility of up to $2.5m against US client
invoices raised by ZOO Digital Production LLC. This facility was in place until 7 July 2021. The principal outstanding at 31
March 2021 was $nil (2020: $500,000). This funding is secured against the US trade receivables of ZOO Digital Production
LLC.
The UK banking partner, HSBC, continues to provide an overdraft facility of £250,000. The principal outstanding at
31 March 2021 was nil (2020: nil). This line of funding has been secured as a floating charge over the assets of the UK
companies.
ZOO Digital Group plc Annual Report 2021
Finance lease liabilities
Finance lease liabilities are payable as follows:
At 31 March 2021 Group only
Less than one year
Between one and five years
Page 89
Future
minimum
lease
payments
Interest Present value
of minimum
lease
payments
$000
646
643
1,289
$000
(118)
(59)
(177)
$000
528
584
1,112
The lease periods of the finance leases range from between 3 and 5 years, with options to purchase the asset at the end of
the term. Finance lease liabilities are secured against the leased assets.
23. Trade and other payables
Trade creditors
Amounts owed to subsidiary undertaking
Social security and other taxes
Contract liabilities
Accrued expenses
Group
2021
$000
3,809
-
399
813
5,747
10,768
2020
$000
2,008
-
179
736
5,126
8,049
Company
2021
$000
372
6,700
300
-
1,509
8,881
2020
$000
167
2,907
130
-
675
3,879
The fair values of trade and other payables equal their carrying amounts.
24. Contracts with customers
The Group and Company have recognised the following assets and liabilities relating to contracts with customers:
Current contract assets
Current contract liabilities
Net current assets
Contract liabilities as at 31 March 2020
New contract liabilities
Revenue recognised in the year:
That was included in the contract liability balance as at 31 March 2020
Relating to new contract liabilities in the year
Contract liabilities as at 31 March 2021
Group
2021
$000
2,178
(813)
1,365
2020
$000
2,021
(736)
1,285
Group
2021
$000
736
1,678
(502)
(1,099)
813
Of the existing contracts that were unsatisfied or partially unsatisfied at 31 March 2021, revenue is expected to be
recognised in the financial year to 31 March 2022.
25. Commitments for Group and Company
Capital commitments
The group had no capital commitments at the 31 March 2021.
Operating commitments
For FY20 & FY21 the group has applied IFRS 16 to operating leases. Other than the lease liabilities included in the Statement
of Financial Position, the Group (and Company) has no operating lease commitments.
26. Related parties
Subsidiaries
The parent company has investments in the following subsidiary undertakings:
Subsidiary
undertakings
Country of
incorporation
Principal activity
Holding
ZOO Digital Limited
UK
Technology development
2 ordinary shares
ZOO Digital Inc.
USA
Sale & distribution technology products
USA
Media production
%
100
100
100*
10,000 shares of
common stock
100 shares of
common stock
ZOO Digital
Production LLC
ZOO Employee Share
Trust Limited
ZOO Digital
Production Limited
ZOOtech Limited
UK
UK
UK
Employee share scheme
2 ordinary shares
100
Dormant
Dormant
100 ordinary shares
100
95,714 ordinary
shares
100
*ZOO Digital Production LLC is indirectly held by ZOO Digital Group plc through ZOO Digital Inc.
Transactions between ZOO Digital Group plc and its subsidiaries, which are related parties, have been eliminated on
consolidation.
Subsidiary undertakings
Cost
Provision for impairment
Net book value
Key management personnel
The details of key management remuneration is disclosed in note 10.
Related party transactions
Interest paid on loans:
Sara Green
Company
2021
$000
11,797
(2,097)
9,700
2020
$000
11,797
(2,097)
9,700
Company
2021
$000
60
2020
$000
59
The gross interest payable to Sara Green at 31 March 2021 is $36,000 (2020: $21,000). The gross interest payable to Roger D
Jeynes at 31 March 2021 is $1,000 (2020: $1,000).
Sara Green, wife of Dr Stuart A Green, held a $847,000 (2020: $759,000) interest in 7.5% unsecured convertible loan stock at
31 March 2021. The underlying value of the interest in the convertible loan stock is £614,500 (2020: £614,500).
ZOO Digital Group plc Annual Report 2021 Page 91
27. Share based payments
Employee share option schemes
Share options have been granted under the following schemes to subscribe for ordinary shares of the company. Movements
in the number of options, under each of the schemes, and their related weighted average exercise price are as follows:
2021
2020
ZOO Digital Group plc EMI scheme
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Surrendered during the year
Outstanding at the end of the year
Exercisable at the end of the year
Options
No.
2,240,318
1,119,827
(255,000)
(250,000)
2,855,145
1,827,818
Weighted
average
exercise price
$
0.50
0.89
0.21
-
0.58
0.46
Options No
.
2,274,818
-
(34,500)
-
2,240,318
1,772,818
Weighted
average
exercise price
$
The underlying weighted average exercise price for the shares under option at 31 March 2021 was 33p (2020:29p).
ZOO Digital Group plc Unapproved
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Surrendered during the year
Outstanding at the end of the year
Exercisable at the end of the year
4,478,500
795,173
(35,000)
-
5,238,673
4,274,001
0.28
0.89
0.22
-
0.37
0.25
4,366,500
200,000
(88,000)
-
4,478,500
3,426,501
The underlying weighted average exercise price for the shares under option at 31 March 2021 was 18p (2020:19p).
Under these schemes the percentage of shares that can be exercised is staggered over the exercise period with typically
40% exercisable after the first year and a further 30% in each of the following two years.
Share options granted to key management personnel, including directors, during the year ended 31 March 2013 have a
vesting condition that the company’s share price must be £0.40 or higher on twenty consecutive business days prior to
exercise.
Share options granted to key management personnel, including directors, during the year ended 31 March 2018 have vesting
conditions. A total of 3,820,000 share options have a vesting that the company’s share price must be £0.20 or higher for a
period of at least three months immediately prior to exercise and 1,000,000 share options have a vesting condition related
to the profitability of the group.
Out of the 8,093,818 outstanding options (2020: 6,718,818 options), 6,101,819 were exercisable (2020: 5,199,319).
0.50
-
0.22
-
0.50
0.36
0.25
0.80
0.37
-
0.28
0.23
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc EMI scheme
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
ZOO Digital Group plc Unapproved
Outstanding at the end of the year
Options
No.
184,167
52,500
25,000
10,000
1,188,651
275,000
1,119,827
190,000
50,000
350,000
153,500
3,305,000
30,000
165,000
200,000
795,173
8,093,818
Expiry date
Exercise price
$
Exercise price
£
11 Jul 2022
26 Sep 2023
19 Jan 2025
17 Sep 2025
2 Aug 2027
2 July 2028
13 May 2030
11 Jul 2022
26 Sep 2023
19 Jan 2025
17 Sept 2025
2 Aug 2027
5 Oct 2027
2 Jul 2028
30 June 2029
13 May 2030
0.23
0.24
0.23
0.23
0.20
1.33
0.89
0.23
0.24
0.23
0.23
0.20
0.49
1.33
0.80
0.89
0.1500
0.1500
0.1500
0.1500
0.1525
1.01
0.73
0.1500
0.1500
0.1500
0.1500
0.1525
0.3800
1.01
0.63
0.73
In arriving at the fair value, each option grant has been valued separately using the binomial model and the resulting fair
value is expensed over the vesting period. The following table lists the range of assumptions used in the model:
Jan 2015
Sep 2015
Aug 2017
Oct 2017
July 2018
Nov 2018 May 2020
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
67
1.08
5
61
1.35
5
57
0.55
5
57
0.55
5
57
0.55
5
57
0.55
5
83
0.55
5
Expected dividends
none
none
none
none
none
none
none
Volatility has been estimated by taking the historical volatility in the company’s share price over a three year period up
to the date of grant of the options. The expected life used in the model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Share based payments have had the following impact on the group’s profit/(loss) for the
year:
Total expense recognised from share option transactions
Share based payment reserve appears in the statement of financial position under:
Share option reserve
2021
$000
710
2021
$000
2,085
2020
$000
290
2020
$000
1,375
ZOO Digital Group plc Annual Report 2021
Page 93
28. Financial instruments
The group’s financial instruments comprise cash and liquid resources, a convertible loan, and various items, such as trade
receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to
provide working capital for the group’s operations.
The adoption of IFRS 9 has resulted in a reclassification of financial instruments as follows:
• financial assets previously classified as loans and receivables are now classified as financial assets subsequently
measured at amortised cost.
Categories of financial instruments
Financial Assets subsequently measured at amortised
cost
Trade and other receivables excluding pre-payments
and VAT (note 18)
Amounts owed by subsidiary undertakings (note 18)
Cash and cash equivalents
Total
Financial liabilities subsequently measured at
amortised cost
Finance lease liabilities (note 22)
Amounts owed to subsidiary undertakings (note 22)
7.5% Unsecured convertible loan stock (note 22)
Other bank borrowings (note 22)
Trade and other payables excluding payroll taxes (note
23)
Total
Financial liabilities at fair value through profit or
loss (level 2)
Separable embedded derivative (note 22)
Total
Group
2021
$000
9,471
-
2,949
12,420
2021
$000
1,112
-
3,526
-
10,369
15,007
2020
$000
8,881
-
1,218
10,099
Group
2020
$000
552
-
3,168
500
7,870
Company
2021
$000
-
18,160
89
18,249
2021
$000
44
9,701
3,526
-
8,581
2020
$000
-
13,872
25
13,897
Company
2020
$000
108
9,701
3,168
-
3,749
12,090
21,852
16,726
Group
Company
2021
$000
4,452
4,452
2020
$000
978
978
2021
$000
4,452
4,452
2020
$000
978
978
Market Risk
Foreign currency risk
The main risks arising from the group’s financial instruments are from foreign currency risk.
The group includes subsidiaries operating in both the UK and USA. The majority of the group’s transactions are
denominated in US dollars, however the costs arising from the UK subsidiaries are denominated in pound sterling therefore
exposing it to a currency risk of fluctuations in the pound sterling/US dollar exchange rate. During the year ended 31 March
2021 there was similar volatility in the pound sterling/US dollar rate as in the previous year with the rate peaking at 0.8254
and falling to a low of 0.708875, with an average rate of 0.7659. If the US dollar had remained at its highest level throughout
the full year the group would have shown a post-tax profit of $5.3m (2020: Profit $2.3m), if US dollar had been at its lowest
level throughout the full year the group would have shown a post-tax profit of $6.1 (2020: Profit $1m) and if the US dollar had
remained at the average rate throughout the year the group would have shown a post-tax profit of $5.7m (2020: $1.4m).
Transactions between the company and its subsidiaries are in US dollars, however the company is exposed to exchange
rate fluctuations due to the majority of its costs being denominated in pound sterling and through the revaluation of the
company’s pound sterling creditors.
The main exposure for the group and the company to fluctuation in the pound sterling/US dollar rate is through the
Convertible loan note creditor which is denominated in pound sterling. The value of the loan is translated at the year end
exchange rate. The foreign currency risk through the Convertible loan note has a significant impact on the reporting of
exchange variances but it is not expected to have a material commercial risk as the expectation is that the loan will be
converted into equity which is also denominated in pound sterling.
The pound sterling/US dollar exchange rate at the 31 March 2021 was 0.726 (2020: 0.809).
Interest rate risk
The loan notes pay a coupon of 7.5%. The US dollar value of the loan notes at 31 March 2021 was $3,526,000 (2020:
$3,168,000).
The group and company consider the interest rate risk on the loan to be minimal as the rate is fixed.
The group has an arrangement with Crestmark Bank to provide an invoice financing facility of up to $2.5m against US client
invoices raised by ZOO Digital Production LLC. This facility has been renegotiated since the year end and is now in place
until 7 July 2021. Interest is payable on a monthly basis at an interest rate linked to LIBOR with a monthly minimum fee. The
principal outstanding at 31 March 2021 was nil (2020: $500,000). The group is subject to interest rate risk on the movement in
the LIBOR rate.
The HSBC bank overdraft facility has terms linked to the UK base rate but the interest rate risk is minimal due to the
reduced need for drawing down upon the facility.
Liquidity risk
Liquidity risk is the risk that the group and company will not be able to meet their financial obligations as they fall due.
Management monitors rolling forecasts of the group’s cash and cash equivalents on the basis of expected cash flows,
reducing its liquidity risk through management of bank accounts, trade debtors and trade creditors, by utilising the
availability of an overdraft facility, finance leases and invoicing financing facilities and through controls on expenditure. The
majority of convertible loan stock is owned by major shareholders of the company.
The group has an agreement in place with Crestmark Bank to provide an invoice financing facility of up to $2.5m against US
clients’ invoices. This facility will be in place until July 2021, with the option to extend. The principal outstanding at 31 March
2021 was nil (2020: $500,000).
The group has a £250,000 overdraft facility in place from HSBC for the UK companies. There has been no lending drawn
down from this facility to date.
The tables below analyse the financial liabilities which will be settled on a net basis into relevant maturity groupings based
on the remaining period at the year end to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Group
At 31 March 2021
Borrowings
Finance lease liabilities
Trade and other payables
At 31 March 2020
Borrowings
Finance lease liabilities
Trade and other payables
Less than 1
year
$000
3,526
528
10,768
Between 1 and
2 years
$000
-
-
-
Less than 1
year
$000
-
260
8,049
Between 1 and
2 years
$000
3,668
-
-
Between 2
and 5 years
$000
-
584
-
Between 2
and 5 years
$000
-
292
-
Over 5 years
$000
-
-
-
Over 5 years
$000
-
-
-
ZOO Digital Group plc Annual Report 2021 Page 95
Company
At 31 March 2021
Amount owed to subsidiary undertakings
Borrowings
Finance lease liabilities
Trade and other payables
At 31 March 2020
Amount owed to subsidiary undertakings
Borrowings
Finance lease liabilities
Trade and other payables
Less than 1
year
$000
Between 1 and
2 years
$000
9,701
3,526
44
8,881
Less than 1
year
$000
9,701
-
64
3,879
-
-
-
-
Between 1 and
2 years
$000
-
3,168
-
-
Between 2
and 5 years
$000
-
-
-
-
Between 2
and 5 years
$000
-
-
44
-
Over 5 years
$000
-
-
-
-
Over 5 years
$000
-
-
-
-
Credit risk
Credit risk arises from cash and cash equivalents and credit exposures on outstanding receivables. The group’s and
company’s main credit risks are on the outstanding trade receivables. This risk is reduced through credit control
procedures. An analysis of outstanding receivables is included in note 18.
The 2020 cash flow has been updated to kore appropriately reflect IFRS 16 balances.
29. Capital management
The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern, so that it
can provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders
by pricing products and services commensurately with the level of risk.
The group sets the amount of capital in proportion to risk. The group manages the capital structure and makes adjustments
to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain
or adjust the capital structure, the group may return capital to shareholders, issue new shares, or sell assets to reduce debt.
Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as
net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’
as shown in the Consolidated Statement of Financial Position) less cash and cash equivalents. Total capital is calculated as
‘equity’ as shown in the Consolidated Statement of Financial Position plus net debt.
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
Adjusted Gearing ratio *
*Adjusted for the impact of the non-cash embedded derivative movement
2021
$000
11,243
(2,949)
8,294
2,839
11,133
74%
66%
2020
$000
8,006
(1,218)
6,788
5,297
12,085
56%
48%
30. Post Balance Sheets Events
Since the end of the financial year, we are pleased to have completed a 10% placing of new equity raising a gross $10.3
million. This money will be used to accelerate our international growth brought about by the favourable market conditions.
The details of the placing are that the company has raised gross proceeds of £7.4 million ($10.3 million) through the
oversubscribed placing of 7,454,727 Ordinary Shares with a certain existing and new institutional and other investors at a
price of 100 pence per New Ordinary Share. The shares were admitted to trading on the 6 April 2021.
ZOO Digital Group plc Annual Report 2021 Page 97
GROUP DIRECTORY
Head Office
ZOO Digital Group plc
ZOO Digital Limited
ZOO Digital Production LLC
City Gate
8 St Mary’s Gate
Sheffield
S1 4LW
United Kingdom
T: +44 (0)114 241 3700
F: +44 (0)114 241 3701
City Gate
8 St Mary’s Gate
Sheffield
S1 4LW
United Kingdom
T: +44 (0)114 241 3700
F: +44 (0)114 241 3701
2201 Park Place
Suite 100
El Segundo
CA 90245
USA
T: +1 310 220 3939
F: +1 310 220 3958
ZOO Employee Share Trust Limited
ZOO Digital Inc.
City Gate
8 St Mary’s Gate
Sheffield
S1 4LW
United Kingdom
T: +44 (0)114 241 3700
F: +44 (0)114 241 3701
2201 Park Place
Suite 100
El Segundo
CA 90245
USA
T: +1 310 220 3939
F: +1 310 220 3958
zoodigital.com
ZOO Digital Group plc Annual Report 2021