ANNUAL
REPORT 2022
Welcome to
A BRAVE ZOO WORLD
ZOO Digital Group plc
Annual Report 2022
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Key performance indicators
Welcome / Year in review
Streaming: The future of home entertainment
Key performance
indicators
The new wave of streaming
What we do
What makes ZOO stand out
ZOO Digital Labs
Global Expansion
Globalisation: Under the microscope
ESG Strategy
Chairman’s statement
Strategic report
Financial Review
Corporate governance statement
Advisers
Directors’ report
Remuneration Committee report
Directors’ remuneration report
Independent auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Company statement of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
Group directory
Financial
Revenue
$70.4 million
(FY21: $39.5 million)
EBITDA margin1
11.8%
(FY21: 11.5%)
Operating expenses as
a % of revenue
27%
(FY21: 32%)
Operational
Number of freelancers2
11,028
(FY21: 9,207)
Retained sales3
97.6%
(FY21: 98.5%)
1. Adjusted for share-based payments
2. The number of active freelance workers in ZOO’s systems who are engaged directly
3. Proportion of client revenues retained from one year to the next
Annual Report 2022ZOO Digital Group plc 3
WELCOME TO
OUR ANNUAL REPORT
Streaming is the new normal in
home entertainment.
More content. More platforms.
More languages.
Global investment in content is set to surpass
$220 billion in 2022 as entertainment becomes
more widely accessed than ever before – thanks
in large part to the boom in streaming.
In 2022 and beyond, the entertainment industry is
delivering more content onto more platforms and
into more languages.
As a leader in the globalisation industry, ZOO
Digital is well positioned. Built from the ground up
to tackle even the most complex media content
challenges and reach audiences everywhere.
With sales up 78% year-on-year, ZOO is taking
share in a growing market and deepening
partnerships with the biggest names in
entertainment. Making life easier for the people
who entertain the world.
YEAR IN REVIEW
Four new production facilities in
Korea, Turkey, India and
Denmark
Team ZOO increased
by 38% (to 413)
Working with over
11,000 freelancers
Launched and developed
ZOO Academy programme
Localised (approximately)
613 million words
Brand launch of
ZOO Digital Labs
Page ZOO Digital Group plc
Annual Report 2022
STREAMING
THE FUTURE OF HOME
ENTERTAINMENT
U.S. Consumer Spend New v. Legacy Subscription TV/Video
2016 - 2026 ($B)
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
0
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Legacy Pay TV
New Subscription/TV Video
Source: Strategy Analytics TV & Media Strategies service, April 2021
Note: Legacy pay TV includes cable, satellite and managed IPTV, New includes SVOD and vMVPD
The global OTT (Over-The-
Top) market was worth $122
billion in 2019. It is forecast to
grow to $1 trillion by 2027.
The average US household now has four
subscriptions as streaming takes the lead
on legacy pay TV.1
Streaming has changed the shape of
entertainment and it’s only getting started.
1. Kantar
Annual Report 2022ZOO Digital Group plc Page
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THE NEW WAVE OF STREAMING
Streaming video on demand
has changed the shape of
entertainment, led by the
likes of Netflix, Prime Video,
Hulu and Apple.
Now, a second phase sees a host of major
content owners launching or expanding
their own dedicated streaming platforms
around the world.
More Content
Audience demand for fresh content,
sourced domestically or internationally,
is relentless – but new streaming video
services are ready to capitalise.
Major streamers are expanding their
content offering – both in terms of new,
original productions and decades of highly
sought-after catalogue content localised
for new audiences.
Over the last year, this global investment in
content was estimated at $220 billion, with
further growth expected throughout 2022.
• Spend on film and TV production in 2021
– $220 billion1
• Subscription OTT services increased
investment in content by 20% in 2021 to
nearly $50 billion1
• Competition amongst media companies to
secure content and production capacity
• Production capacity in English-speaking
countries is saturated
Non-English Content
Going Global
Shows such as Dark, Money Heist, Lupin
and Squid Game have demonstrated the
global reach of international content – at
least half of European Netflix and Amazon
Prime viewing time could be spent
watching non-English language content by
20302.
• Squid Game became the most popular
Netflix show in over 90 countries3
• Netflix has invested over $1 billion in Korean
content alone3
• English dubbing is on the rise
• New platform rollouts lead to proliferation
of demand for localisation
More Languages
Likewise, global SVOD subscribers are
projected to grow by 43% by 2026. This
international consumption of content in
previously untouched markets drives an
intense demand for localisation and media
services.
• US streaming video service penetration 85%2
• Global SVOD subscribers to grow
by 43% by 20263
• High growth markets: SEA (39% by 20263),
India (137% by 20263)
• Drives demand for globalisation services
1. Ampere Analysis, 2021
2. Entertainment on Demand, 2022
3. Digital TV Research, 2021
Page WHAT WE DO
Globalising media content made smarter, easier, better.
ZOO provides the end-to-end localisation and media services required
to adapt original TV and movie content for different languages, regions
and cultures. These globalisation services are trusted by the biggest
names in entertainment.
Language versions
Content
Delivery at scale
Media services
ZOO Digital:
Delivering high-quality
localisation and media
services at scale.
Dubbing
Metadata Localisation
Audio Post Production
Artwork Localisation
Audio Description
Compliance
Subtitling
Scripting
Mastering
Media Services
Annual Report 2022ZOO Digital Group plc Page
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Media Localisation
• International audiences demand
localised content
• Content is localised into many languages
(Netflix produced 5 million
minutes of subtitling and 7 million minutes
of dubbing in 20211)
• Primary driver of growth is new content
production
• Catalogue content provides
additional volume
Estimated addressable market for media
localisation:
• Estimated Netflix spend $500m2 – represents
2.9% of Netflix 2021 content spend of $17bn
• Major streaming companies spent $50bn
(out of global total of $220bn) on new original
content in 2021 (excluding catalogue content)
• Assuming these adopt a similar strategy
to Netflix, we estimate $1.5bn content
localisation spend by major streaming
companies
Post to Platform
As an end-to-end localisation service
provider, ZOO Digital offers all the services
needed to transform media created by
production companies into fully compliant
digital packages, ready for playout on
streaming video platforms. This post to
platform service takes a complex process
and keeps it simple. Whether our teams
are working with a streaming service with
hundreds of content owners to manage, or
a production partner delivering valuable
content to a platform, our job is to make their
life easier. Global teams deliver end-to-end
project management and technical services
so licensed content gets to where it needs to
be. Compliant and on time. Every time.
Trusted by the biggest names in entertainment to
deliver localisation and media services at scale.
Our team is trusted to deliver licensed content to the world’s leading streaming services.
Technical capabilities combined with dedicated project management skills mean partners and
their content are in safe hands.
1. Netflix 2022 2. ZOO Digital estimate
Page ZOO Digital Group plc
Annual Report 2022
What makes
What makes
ZOO STAND OUT
Problem Solvers
ZOO customer proposition
“For the world’s biggest
content creators whose job
is getting increasingly
tougher, ZOO is on your side.
We are the globalisation
partner that takes even the
most complex media content
challenges and makes them
simpler by finding smarter,
better ways of doing things,
making your life easier at
every step.”
Purpose:
Enriching lives through access to
entertainment
Mission:
To make life easier for the people
who entertain the world
Vision:
We will be our customers’ most
trusted partner to help them
deliver engaging, entertaining and
immersive content experiences to
their global audience.
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Our differentiators are
what we do that no
one else can. They are
what set us apart in our
customers’ eyes. Our
three differentiators,
identified by strategic
research, are:
Foresight + Agility
We see what’s coming and act on it
The media landscape has seen
unparalleled change and for that reason
we never stand still. We are always
looking forward while challenging what
has gone before us to make sure we
are ready to adapt, deliver and meet
our customer needs whether it’s today,
tomorrow or in two years’ time.
Innovation + Talent
Combining magic and logic at every step
Creativity vs technology. Speed vs quality.
Big picture vs small details. We believe
these shouldn’t be mutually exclusive
traits. We combine the talent of our
people, with market defining technology
and innovation. We apply this magic and
logic at every opportunity to ensure there
is no weak link in the globalisation of
content.
Purpose + Drive
Smarter, easier, better is our life’s work
If we see a kink, we straighten it. If we
hit an obstacle, we don’t stop until it’s
cleared. Present us with a challenge and
we’ll find a solution. Because we look at
things differently, we find smarter, better
and easier ways of doings things. This
approach is hard-wired into the way we
work. Always has been. Always will be.
Page A BRAVE ZOO WORLD
Globalising media content made smarter, easier, better.
Annual Report 2022ZOO Digital Group plc 11
Page INTRODUCING
ZOO DIGITAL LABS
Ingenious engineers developing
industry-defining technology.
Relentless in the pursuit to make life easier
for the people who entertain the world.
ZOO Digital Labs is made up of some of
the smartest thinkers in entertainment. This
award-winning team creates the software
platforms, tools and technologies that help
the world’s greatest content creators share
their stories with audiences everywhere.
Faster, smarter and better than ever before.
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Unlocking
Entertainment
Our engineers are driving the entertainment
industry forward. Their technological
innovations unlock content for global
audiences, bringing people across the world
together through the localisation of film and
television.
Global
Game-Changers
ZOO Digital Labs is a melting pot of talent.
An award-winning team of true innovators,
working on the cutting-edge of technology.
Turning can’t into can with industry-defining
software. Developing current solutions for
future challenges.
A Home
For The Curious
At ZOO Digital Labs, our team is trusted to
create its own journey, with just the right
balance of challenge and freedom. We
don’t fit into any one mould. We overcome
challenges together. We empower each other
to share and grow – at every step of the way.
Page GLOBAL EXPANSION
Team ZOO spans continents and cultures to
do incredible things.
Bringing insight and expertise to every project. By sharing
our ideas and collective experience, we’re helping to
shape the future of media globalisation.
Hub
Territory Managers
Partner Studios
ZOO Technology Ecosystem:
All regional hubs, dubbing studios, partners
and freelancers work together in the ZOO
technology ecosystem. This guarantees
consistent security, process efficiency,
production quality and rapid scalability
across the world.
ZOO technology is built for security and
scale – so new localisation or media servicing
resource can be fired up in any in-demand
territory to take pressure off existing
facilities and develop additional capacity.
Annual Report 2022ZOO Digital Group plc Page
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ZOO India
ZOO Denmark
ZOO continues to
build its presence in
the fastest-growing
markets – ensuring we
are strategically aligned
with our customers.
ZOO Korea
ZOO Turkey
Page GLOBALISATION:
UNDER THE
MICROSCOPE
ZOO works on end-to-end projects at huge
scale. Unlocking entertainment for the world.
Here’s what goes into just one show, being
readied for a new territory launch.
Let’s say the show has five seasons and
each episode has a runtime of 30 minutes.
To ready the content for a new territory
launch, it may need to be localised into, say,
12 langauges
With an average of 600 subtitle events*
for one 30-minute episode, five series
would involve 60,000 events per language.
720,000 subtitle events in total!
Each event includes roughly
10 words, so that’s 7,200,000
localised words for one show.
Delivering end-to-end services to our clients
means the same project may also involve…
Roughly 36,000 runtime minutes’ worth of
dubbing performed, captured and quality
controlled
As well as services across audio
description, artwork localisation, mastering
and more.
Around 5,000 pieces of metadata
reviewed, localised and neatly packaged.
This is one show.
* Subtitle ‘event’ is each line of on-screen dialogue
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Our clients are the biggest names in entertainment
and are continuing to roll out dedicated streaming
platforms into new territories.
Each individual territory launch could involve around
250 series or features.
With the promotion and pressures to go into each
regional launch, these all need completing to the
same exacting quality standards and highly-publicised
deadline. This is globalisation at scale and pace – and
it’s what we do best.
Page ZOO Digital Group plc
Annual Report 2022
ESG STRATEGY
ZOO Digital is growing and globalising and as we do,
we are committed to ensuring that we’re building a
responsible future-focused business.
Sitting at the very heart of our business model
are our cloud-based software platforms that give
our customers an energy and infrastructure efficient
way of managing their dubbing services without
the need for purpose-built studios. In addition, our
unique approach to fulfilling these services remotely
also reduces the time and emissions for voice actors
and dubbing directors who would otherwise need to
travel to local studios to work – helping significantly
reduce Scope 2 and Scope 3 Greenhouse Gas
emissions for us and our customers.
THREE DELIVERY
PILLARS AND THE 16
MATERIAL TOPICS
E
S
1. Reducing carbon footprint
2. Zero Waste and recycling
3. Health, Safety & Wellbeing of own
workforce and freelancers
4.
Diversity, Equity & Inclusion
5.
Employee empowerment,
training & upskilling
6. Human Rights
7. Growing new talent
8. Contributing to global
accessibility in entertainment
G
9. Charitable support
10. Innovation and R&D
11. Bespoke client solutions
12. Tech driven operational and
economical efficiencies
13. Ethics, Compliance & Transparency
14. Data privacy and cyber security
15. Supply chain engagement
16. Industry & academic partnerships
01 Think smarter
We enrich the lives of our people and enhance
their skills through access to industry-leading
learning & education opportunities. [7] [16]
Diversity is critical to our success as a global
business. We want to learn from those around
us and inspire the next generation of talent
to enter the digital media industry whatever
their background, gender, sexual preference,
cultural identity or ethnicity. [4] [7]
Annual Report 2022ZOO Digital Group plc Building on this core strength, we have been
considering other ways that our Group can improve
its impact on the environment and people.
We appointed external consultants to help us build
a deeper understanding of the environmental, social
and governance (ESG) impacts of our business
and are now developing a strategic framework for
sustainability at ZOO.
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During the review, we reached several conclusions
that will inform our future sustainability strategy.
• The need to articulate a clear purpose to supplement our existing
Vision and Mission. We recognise that great people are key to our growth plans and that
we need to attract, retain, and develop talented individuals. Having an inspiring purpose
that transcends our business goals, and explains our wider impact in society, will help
reinforce the culture and behaviours that will help us deliver our vision and mission.
• We have identified sixteen material topics that ZOO will focus on, measure and improve
in the future, in the areas of Environment, Social and Governance.
• These sixteen material topics have been mapped to our three core value pillars as
reproduced below to highlight the alignment of the material topics with ZOO’s culture
and the areas where we can make the most difference.
• We are now identifying the workstreams and measurement criteria for the next two
years to ensure we codify our strategy and have the appropriate governance, goals, and
targets in place to deliver against it.
02 Make it easier
03 Be better
We work to make it easier and more efficient for
customers & freelancers to use our localisation
services. [12] Our unique technology platform
means our customers can localise their content
more cost-effectively, without having to travel. [11]
We relentlessly innovate to meet the future needs
of the entertainment industry. [10] [14] Our flexible
workplace approach enables collaboration and
allows our people to work in a way that best suits
them. [3] [5] [6] [15]
Disruption favours the brave. We are always
looking for a way to do things better. [13] We
are daydream believers, making access to
entertainment easier for all and donating our
time and resources to charity partners working
towards the same goal. [8] [9] We are determined
to minimise our impact on the planet. [1] [2]
Page NEW SOCIAL
RESPONSIBILITY
COMMITTEE
We have set up an internal team headed by a main
Board member called the Social Responsibility
Committee, which is responsible for formulating ESG
policy, initiatives, and measurement of effectiveness
of all ESG programmes.
This committee meets at least once a month and,
working with our human resources team, has already
prepared the statement of purpose and the 16 material
topics. It has identified three major industry charities
that support our purpose and mission, and joint
initiatives will commence in FY23.
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The Social Responsibility Committee has also recognised
the need to support local communities and this has led
to the company-wide initiative known as ZOOgooders,
which was recently approved by the main Board and allows
all staff to spend two fully paid days a year to support a
charity or local community project.
Board-level commitment to
diversity, equity and inclusion
Our commitment to sustainability from the
Board also includes a focus on diversity,
equity and inclusion (DE&I). We recently
commissioned a comprehensive survey into
DE&I across the ZOO workforce, which will
give us a benchmark from which to measure
future improvements.
This year we also launched ZOO Academy,
the goal of which is to bring more diverse
talent into the industry. We will also soon
be launching an innovative apprenticeship
scheme to encourage more young people to
become software engineers.
Supporting home working
Our human resources team continues
to support enhanced health and safety
procedures in our upgraded offices –
offering support to our working from home
initiative and implementing an e-learning
platform that is available to all staff to assist
in building their work and life skills.
The introduction of a formal ESG strategy means we can codify
and measure how we are improving our impact on these critical
issues. We are excited about developing and executing our ESG
strategy over the coming months and years.
Page CHAIRMAN’S STATEMENT
It gives me great pleasure to report an outstanding year for ZOO Digital. The Company has delivered organic revenue growth of 78%
and EBITDA (excluding share-based payments) growth of 84% during a period in which significant investment has been made in people,
infrastructure, offices, and international operations.
In September 2020, we introduced for the first time our ambitious medium-term target to reach $100 million in sales – a steppingstone
towards our long-term aspirations to become the largest vendor in our sector. This was accompanied by a ‘bridge’ to indicate how we
expected the gap to be filled by contributions from our largest client and from others across our key revenue sources of subtitling,
dubbing and media services. At that time our revenue for the full year to March 2020 was $29.8 million. Following each subsequent results
announcement and trading statement we have updated the market with a revised bridge to indicate changes in our expectations. The
most recent version indicates FY22 sales achieved of $70.4 million, well ahead of initial expectations at the beginning of the year.
Whilst FY22 has been a remarkable year for ZOO, we anticipate further significant market developments which will continue to be
favourable to the Company in the year ahead. Indeed, we expect that the profound changes that are taking place across our industry will
vindicate ZOO’s strategic plan and the role the Company has played in bringing about a digital transformation in the media localisation
supply chain.
Three Direct to Consumer (DTC) streaming video platforms from leading US media companies have recently begun their international
rollouts, further compounding the already record high volumes of premium localisation services required by longer established
participants. Consequently, demand is outstripping supply, and the industry requires expansion in capacity that is unlikely to be satisfied
by traditional approaches alone. ZOO’s scalable cloud-based approach provides an efficient and effective solution to the industry’s
evolving requirements.
Increased competition amongst consumer services, combined with subscribers exercising greater caution over discretionary spend,
has resulted in a changing picture of the progress of the streaming video market. Our view, consistent with independent commentators,
is that the overall market will continue to grow strongly, particularly in international locations, although the relative shares of leading
participants may change. This heightened competition will require media companies to invest more heavily in original content and make
this content go further by localising it for international markets. As a vendor to all the major media companies, and as one of the few
service providers with the scale to deliver simultaneous, single-day global launches, ZOO is optimally positioned to benefit from the
evolving market backdrop.
Upon raising £7.4 million ($10.1 million) in a share placing in April 2021, the board outlined how market conditions were presenting a
unique opportunity for ZOO to seize market share. Our plan would invest the proceeds by growing the R&D and service delivery teams,
establishing regional hubs, expanding international business development, and strengthening our infrastructure. I am pleased to report
that we have made significant progress on all fronts and delighted that we have expanded our capabilities in Turkey, South Korea, India,
and Denmark during the period.
Together with my board colleagues I would like to extend my appreciation to our supportive former holders of loan notes who, in
September 2021, agreed to convert those notes into the share capital of ZOO, thereby eliminating all the Company’s long-term debt. This,
combined with the proceeds of the fundraise, leaves ZOO with a strong balance sheet and well placed for its continued rapid growth.
I should like to take this opportunity to welcome the newest member of our board. Nathalie Schwarz, who became a non-executive
director in January 2022, brings 20 years of board-level international experience. She has expertise in the media and digital technology
sectors with a career spanning broadcasting (television and radio), mobile and digital interactive platforms and information/data services.
Nathalie will chair the Remuneration Committee from summer 2022 and is an experienced Remuneration Committee chair.
Finally, I would like to express my sincere thanks to all my colleagues globally in the UK, USA, Europe, Middle East, South Asia and
Southeast Asia for their instrumental role in delivering such a successful year.
I look forward to reporting on the exciting period ahead and remain confident in the Company continuing to deliver strong profitable
growth.
Gillian Wilmot
Chairman
Annual Report 2022ZOO Digital Group plc STRATEGIC REPORT
23
Introduction
This report covers an exceptional period for the Group, bringing into sharp focus the strengths of its strategic plan. ZOO makes life easier
for the streaming companies who now lead in entertaining the world by providing a comprehensive suite of software-enabled services
to allow feature films and TV series to be adapted for and delivered to global audiences. Our aim is to be our customers’ most trusted
partner to help them deliver engaging, entertaining, and immersive content experiences to their consumers around the world.
ZOO’s primary customers are major media organisations, predominantly in the US, almost all of which now offer streaming services
and seek to differentiate their propositions through diverse catalogues of frequently updated premium original entertainment content.
With the rapid decline in demand for packaged media (DVDs and Blu-ray discs) and PayTV which were previously significant generators
of cash and profits for major media organisations, the future of these companies rests on monetising content through streaming. Both
Subscription Video on Demand (SVOD) and Advertising Video on Demand (AVOD) are being variously pursued as the operators seek to
maximise the return on their substantial investments in entertainment content through the streaming market.
Most of this content, made up of episodic TV series and feature films, is developed by independent production companies whose
key deliverable in each case is a ‘master’ of the audio-visual materials. Before a programme can be streamed to consumers there is
significant further work necessary. This work falls into two broad categories: (1) the video, audio and other assets must be converted into
formats and combined into packages that meet the specific technical requirements of the target platform(s) as well as certain creative
requirements of local markets and audiences (collectively referred to as “media services”); and (2) the original dialogue in the programme
must be adapted into potentially many other languages through the creation of culturally-sensitive subtitles and dubbed soundtracks
(collectively, “media localisation”). These services are highly specialised and demanding; their complexity is illustrated by the number of
deliverables required for each original programme which can often be counted in thousands.
ZOO is one of very few ‘End-to-End’ (E2E) vendors in the industry with the capability to deliver the full range of media and localisation
services to the high standards demanded of the major industry buyers, and with coverage of over 40 languages that are now regularly
required for global distribution. A key differentiator of ZOO in the market is the cloud-based software systems that have been developed
by its in-house R&D team over many years, bringing efficiency and scalability to the Company, its customers and its large community of
freelancers including specialist media translators, directors, and actors.
In the past, it was common practice for large buyers to divide work amongst many vendors, with each vendor providing a subset of the
services required. In the current market both the volume of original programmes produced each year as well as the number of languages
into which those programmes are delivered are at record levels. The decline in their traditional sources of income has led buyers to
look for greater efficiencies in their internal operations, and one strategy that has become popular is to outsource all media services
and localisation across a much smaller number of more capable vendors. Thus, there is growing attraction to vendors such as ZOO that
provide an E2E service.
A further strategy that may be employed by these buying organisations is the adoption of Enterprise Resource Planning (ERP) software
to support internal staff in managing the complexity of these services and the high number of deliverables. Generalised ERP systems are
not well suited to the required degree of specialism and the task is best served by special-purpose solutions that are tailor made for this
domain. ZOO has developed such a system called ZOOstudio that it makes available to its customers as an integral component of its
offering.
From an ESG standpoint we believe ZOO’s strategy makes it environmentally superior to its competitors given that the Group does not
need to own and operate dubbing facilities in every country nor require high levels of travel by acting and directing talent. The Company
has strengthened its ESG credentials more broadly through several initiatives and has developed a sustainability strategy around its three
core value themes of ‘think smarter’, ‘make it easier’ and ‘be better’. These include our ZOO Academy programme, apprenticeships,
university partnerships, innovation, employee engagement, charity partnerships and our ZOOgooders initiative that are explained later in
this report.
Market Overview
Following a year in which new original title production was significantly disrupted due to the global pandemic, the trend continued into
the beginning of FY22. Throughout this period the projects assigned to ZOO by customers were predominantly related to titles that
had already been produced prior to the pandemic. A significant proportion of this work was to support the launch of existing streaming
services in new territories which entails (1) taking the catalogue of titles available on a platform in other countries and producing new
language versions, and (2) preparing a range of content for distribution in the languages of a region, usually through licensing of pre-
existing third-party content.
Production of new titles resumed during the year and resulted in associated orders for media services and localisation returning in August
Page 2021 at which point the mix of catalogue versus new content began to shift. By the end of the period the work relating to new titles
accounted for a much greater proportion of the pipeline.
Three DTC streaming services were launched before or during the period of the pandemic by major US media companies: HBO Max
from Warner Bros Discovery (the merger of AT&T’s WarnerMedia unit and Discovery Inc. which was completed in April 2022), Peacock
from NBCUniversal (a subsidiary of Comcast) and Paramount Plus from Paramount Global (formerly ViacomCBS, the merger of Viacom
and CBS which completed in December 2019). Following their availability in the US and some English-speaking markets, these services
have only recently begun their international rollout. Although in this regard they lag the first of the major DTC services, Disney+, by over
two years, all three have publicly stated their commitment to making their services available across many countries.
The growing availability of multiple global streaming services in many countries is creating increased competition for viewers. The appeal
of each of these services rests entirely on the strength of the catalogue of content they offer. To maximise this appeal the operators are
discontinuing their licensing of some or all owned content to other services so that these titles are exclusively available on the operator’s
platform. This means that some high value content that was previously included on other services is being withdrawn, thereby potentially
diminishing the perceived value of those other services.
Since content is the key differentiator of one service from another, each platform is compelled to continue to add new, fresh, high-
quality titles to attract viewers and retain those who already use the service. This has propelled the volume of new original programme
production to an all-time high. Market commentator Ampere Analysis reported that the global spend on original programming reached
$220 billion in 2021 and is expected to grow strongly in 2022 and beyond. Of this total around $50 billion was estimated to have been
spent by major streaming services.
Major US media companies already generate most of their revenues outside their domestic market. For example, two thirds of Netflix
subscribers live outside of the US and account for 55% of its revenue. Given that the US has high household penetration of streaming
services (around 85% according to data analysis firm, Kantar), subscriber growth across the industry will come predominantly from
markets where penetration is much lower, such as Southeast Asia, the Middle East and Africa. Consequently, those who commission and
license entertainment content increasingly make choices based on its appeal across multiple international markets.
A separate study by Ampere Analysis notes that historically, US content has tended to dominate on the global stage, while in individual
countries local content has often held the balance of power. But this is beginning to change. In 2017, 15% of the world’s 100 most
popular titles were made outside the US and by December 2021 that figure grew to 27%. Ampere’s analysis shows that the audience for
internationally produced content is growing in the key revenue-generating English-speaking and European markets. SVOD subscribers
in the US, UK, Australia, and Canada, in particular, are tuning in to content produced overseas, and the major global SVOD platforms are
driving this trend by both commissioning high quality non-English language titles and increasing the number of foreign language titles in
their catalogues.
The pandemic offered a boost to internationally produced content as production shutdowns and release delays led to locked-down
viewers looking further afield for shows and movies to watch. As the SVOD players expand geographically and continue to make high
production value titles in a multitude of global markets, Ampere expects the demand for overseas produced content to further increase.
With record volumes of new original content, which is required to be made available in many countries, the market is seeing
unprecedented demand for media localisation services. Major media companies, especially those that are at earlier stages of their
international rollout, are finding that the capacity for subtitling and dubbing in the market is inadequate to meet their needs. As traditional
bricks-and-mortar providers of these services reach their capacity, for them, scaling up is a capital-intensive and slow process. In
contrast, the flexibility afforded by ZOO’s cloud software delivers unprecedented levels of capacity and access to talent all around the
world. Therefore, the Company is well placed to grow in part by servicing projects that cannot be expediently satisfied by traditional
vendors.
The attractiveness of the E2E model is also driving demand for ZOO’s services. We expect more of the large buyers to transition to
this approach in the future, thereby strengthening ZOO’s position in the market as a leading supplier. One effect of this is that more
customers will take multiple service lines offered by ZOO which plays to the strengths of the Company’s proposition and enables
efficient execution through its technology-enabled offerings.
Growth in demand for the services offered by ZOO to media clients is being fuelled by the competitive dynamics of the consumer
market that is expanding through new entrants. The principal competitive arena for global streaming providers is in capturing viewers
for their respective services. According to research published by Kantar in January 2022, the average number of subscriptions per US
household reached 4.7 services in the final quarter of 2021 and is unchanged over the following quarter. Recent reports of subscriber
volatility have heightened competition, however Kantar maintains that U.S. streamers are not leaving the streaming category.
The second area of competition for major streaming services is in relation to content. A differentiated and attractive catalogue that is
updated regularly is essential to win and retain viewers, and therefore the rights to highly valued TV shows and feature films are selling to
the highest bidder.
The board expects a third area of competition between streamers will likely intensify over the period ahead, namely access to capacity
for preparing content for international distribution. This is a highly favourable dynamic that supports the ongoing expansion of the ZOO
business. In this regard, ZOO is more closely aligned with the market dynamics of content production than with the business of streaming
and the number of consumers who view that content.
Media Localisation Market Size
The market dynamics described above are giving rise to expansion of the market for media localisation. In its Video Localisation
Report published in July 2021, language industry intelligence company Slator estimated that video localisation services and technology
constitute a market that it estimates to have been worth $4.97 billion in 2021.
In a recent quarterly earnings call Netflix provided some statistics that illustrate the level of spend on media localisation by large buyers
in the sector. The company disclosed that in 2021 it commissioned 7 million minutes of subtitles and 5 million minutes of dubbed
Annual Report 2022ZOO Digital Group plc 25
soundtracks. We estimate that this corresponds to a spend of the order of $500 million, which equates to just under 3% of the content
budget disclosed by Netflix for the same period.
Netflix is long established in the industry and is progressive in the scope and extent of localisation. Not all industry players are currently
supporting as many languages as Netflix, but to remain competitive it seems likely that market participants will need to expand their
propositions with a similar international reach to Netflix, at which point 3% of content budgets may become the appropriate level of
expenditure necessary to support this ambition.
Strategy
The increasing appeal of ZOO’s proposition – as evidenced by the strong organic growth in FY22 – is attributed to its strategy, built on the
five pillars of innovation, scalability, collaboration, customer, and talent, that differentiate the Company amongst its competitors.
Innovation
During the period, the Company increased its resources in ZOO Digital Labs, its research and development function, with headcount
increasing by 33%. The enlarged team has the capacity to develop its products more quickly as well as to embark on internal research
projects.
ZOOstudio, the Company’s specialised ERP and procurement platform, has been a major focus of development. A wide range of new
features have been added to create enhanced levels of integration between ZOO and its customers as well as to continue to enable
greater levels of efficiency through automation of workflows and elevated security. The system now supports a range of financial planning
and management features, integrated capabilities for review and approval of materials such as scripts and dubbed soundtracks, and
support for capacity planning.
The Company’s cloud dubbing platform, ZOOdubs, is now being used for over 40 languages and has been enhanced further, particularly
to support various territory-specific requirements needed in different locations.
During the period, ZOO Digital Labs pursued further research projects, mostly in collaboration with partners. These include several
initiatives to develop machine learning approaches that we envisage will deliver new product capabilities and competitive advantages in
the future.
Scalability
ZOO’s network of independent freelancers provides the Company with flexibility and scale. The number of freelancers grew by 20%
in the period to over 11,000 individuals located around the world, each providing language-specific expertise in the areas of translation,
adaptation, direction and acting. To continue to grow its capacity ZOO must increase the number of freelancers across these disciplines
in over 40 languages. The Company accelerated this process during the period with the launch of its global growth initiative to establish
points of presence in several critical regions of the world.
During FY22 the Company made capital efficient investments in long-term partners in South Korea and Turkey – two strategically
important locations for the industry due to their tradition of high-quality entertainment content production – and established ZOO Korea
and ZOO Turkey through close strategic alignments with Whatsub Pro and Ares Media respectively. The Company acquired the award-
winning media services and localisation business of long-time partner Vista India, based in Mumbai, to establish ZOO India. Finally, the
Company has established ZOO Denmark in Copenhagen to provide a Scandinavian point of presence. Each of these operations provides
a strategic hub in fast-growing regions and will be pivotal to the expansion of ZOO’s talent pool.
The Company also launched ZOO Academy during the period, an important strategic initiative that will help develop talent, particularly
where there is a shortage of certain services in particular languages. ZOO Academy will provide a range of online courses, workshops,
and other learning resources to deliver both the support to equip new talent with the required industry knowledge and skills, and the
experience required to hone those skills and become effective practitioners. The first ZOO Academy course has now launched and
teaches the skillset necessary to adapt scripts for dubbing. Several further courses across multiple disciplines are in the pipeline and will
be launched in the current period.
Collaboration
An important component of the ZOO Academy programme is the educational partnerships we have developed over several years which
are being expanded and accelerated. Our cloud platforms, including ZOOscripts, ZOOsubs and ZOOdubs, are now being taught by
educational providers around the world with approaching 20 partners signed up to this programme, including teaching centres in the UK,
Europe, Latin America, and Southeast Asia.
ZOO Digital Labs continues to collaborate with our primary research partner, the University of Sheffield, where we currently have active
projects in the areas of computer science and linguistics.
It is through our approach to collaboration that we were able to identify highly suitable targets for our global growth initiative by building
on the long-term partnerships we have established with certain organisations. This significantly de-risks these investments due to the
strong and productive working relationships that have already been established with management, and the willingness to embrace a more
technology enabled approach to the delivery of localisation services (which is not the norm in our industry).
Customer
The strategic rationale for our ZOOstudio platform received a further endorsement during the period: a major media company
that adopted the system in 2019 to support the roll-out of its global streaming video service has deployed it more widely across its
operations. ZOOstudio has now been adopted by additional operating groups within this organisation and the new functionality that has
been added is being widely used. The platform has proven to be highly effective in supporting the complex workflows and processes
associated with preparing content for distribution via streaming, delivering operational efficiencies, providing visibility and transparency,
measuring the performance of vendors, and ensuring high levels of reliability and accuracy.
Furthermore, a second multinational entertainment industry client adopted the platform during the period and is now using it to
Page support its operations. Discussions with further customers regarding adoption of ZOOstudio are in progress. These are highly significant
developments since they result in the embedding of ZOOstudio, an integral part of the Company’s offering, within customers’ operations.
The period included the launch of an important addition to ZOO’s service offering: mastering, which involves optimising a digital original
copy of audio-visual materials for playback through specific channels, such as broadcast and streaming. This new mastering service
creates an additional revenue stream and provides an important adjacent capability that was requested by existing customers under the
scope of E2E engagements. The costs associated with the capital infrastructure to support this service and the recruitment and training
of a new team were incurred in H1. A significant engagement with a leading media organisation was secured in H2 which has delivered
a new revenue stream during the period. This provides good visibility into FY23, not only for the incremental mastering assignments but
also for the wider scope of work that is frequently bundled with such E2E projects in the areas of localisation and media services.
Talent
In FY21 we launched our Advocate programme to engage with experienced and progressive practitioners of the dubbing markets across
key 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, mixing and script adaptation. Our advocates have been invaluable in enabling us to expand our talent
pool across their territories.
We strengthened our Advocate programme further in FY22 with several key appointments in Japan, Singapore, Korea, and Dubai. Key
appointments include:
• Anna Chew, a seasoned media localisation executive, has joined us as Territory Manager for Southeast Asia. She has worked
across Malaysia, Singapore and Taiwan for companies including Disney, Nickelodeon and Blizzard.
•
•
Through our acquisition of Vista India, Rajiv Raghunathan has joined our senior management team. His career spans 25 years spent
in digital distribution, film production, post-production, and media localisation.
In South Korea we welcome to our team Jonghyun Oh. His company has been a leading provider of media localisation services in
the country.
• Our efforts in Turkey are led by Ender Albayrak and Emre Sahinkanat who have each played leading roles in the localisation
industry in Istanbul.
During the period Chris Oakley was promoted to Chief Technology Officer for the Company. In his 18 years with ZOO, Chris has
helped spearhead flagship platforms such as ZOOstudio, ZOOdubs and ZOOsubs. In his new role as CTO, Chris will be responsible for
continuing to grow the ZOO Digital Labs technical centre of excellence to support and future-proof the globalisation industry.
Our ZOO Academy programmes are being led by Ambrish Acharya who joined us as Head of Education. He has over 10 years’ experience
working in audio engineering and sound design for companies including Fox International, as well as roles in audio-visual education at the
Hong Kong Design Institute where he received a Teaching Excellence Award.
During a year of significant growth, our headcount grew from 298 in April 2021 to 413 by the end of March 2022. This figure excludes the 75
staff who have joined us through our Vista India acquisition.
Review of Operations
A significant contributing factor to the strong growth delivered in the period has been the regional launches of our customers’ streaming
platforms in Southeast Asia, Central and Eastern Europe and the Middle East and North Africa. This led to strong demand for localisation,
particularly subtitling, and for a range of activities that fall into ZOO’s media services revenue stream.
Our global growth initiative has given the Company a presence in new locations. This provides the opportunity to expand our operations
in those countries where it may be more convenient to have staff working locally, such as in project management, and to access
specialised industry skillsets such as dubbing management. With an international footprint that now includes Turkey, South Korea,
Denmark, and India, we are shaping the future of the organisation to capitalise on the benefits of having a presence in these locations.
KPIs
The Group manages on an internal basis the following KPIs which assist in measuring progress against the Group’s strategy.
Financial
Revenue up 78% to $70.4 million (FY21: $39.5 million)
•
•
• OPEX as a % of Revenue improved by 5 points to 27% (FY21: 33%)
EBITDA1 11.8% (FY21: 11.5%)
Operational
• Number of freelancers2 11,028 (FY21: 9,207)
•
Retained Sales3 97.6% (FY21: 98.5%)
1. Adjusted for share-based payments
2. The number of active freelance workers in ZOO’s systems who are engaged directly
3. Proportion of client revenues retained from one year to the next
Annual Report 2022ZOO Digital Group plc 27
Media Localisation
Revenues generated from media localisation more than doubled in the period to $42.2 million (FY21: $20.3 million). Dubbing revenues
grew by 84% while subtitling increased by 135%. Assignments relating to catalogue content, which dominated the first half, typically
include a lower requirement for dubbing than new original titles. Consequently, the influx of new titles in the second half led to half-on-
half growth in dubbing revenue of over 170%.
With strong growth in non-English content production, we are now seeing increasing demand for high quality dubbing services into
English. Except for content aimed at children, there has not been a significant requirement for English dubbing in the past, but this is now
changing. The limited number of English dubbing studios in the UK and US means that capable providers are in high demand and this
provides an excellent opportunity for ZOO to resource this requirement through its scalable proposition.
We have also seen significant growth in demand for Audio Description (AD) services during the period. Whilst subtitles for the deaf and
hard of hearing have been commonplace in the entertainment industry (and, indeed, are mandated to some countries including UK and
US), streaming providers have been slow to adopt AD and historically there have been relatively few titles that support it. This is now
changing with regulatory requirements for streaming platforms also looking increasingly likely.
Media Services
Media services revenue grew by 51% during the period to $26.4 million, driven by assignments relating to catalogue content as well as
those to support regional launches of streaming platforms. Service lines that grew particularly strongly were digital packaging/post-
production and metadata preparation.
As previously mentioned, we generated maiden revenues for our mastering service following the recruitment of a Los Angeles-based
team of specialists. Having acquired the necessary infrastructure and recruited the team in the first half, monthly revenues grew
significantly through each month of the second half. The levels of demand that we see for this service have led us to expand the team
further and to seek to extend our operations across some of our other international locations.
We have grown our artwork services team during the period to satisfy the growing demand from our customers for the processing of
images that are used in the user interfaces of streaming platforms. This is also an activity that is increasingly included in E2E services and
where we anticipate strong growth.
Investing for future growth
The oversubscribed fundraise completed in April 2021 provided ZOO with approximately $10 million net proceeds that we indicated we
would invest to support future growth. A proportion of the proceeds has been used to support our working capital cycle for the much
higher levels of business that we have transacted. Our progress in the areas of investment has been:
Capital equipment
We have invested around $4.4 million in capital equipment to extend our capacity. We have upgraded our internet connectivity at our
sites in Los Angeles, London, and Sheffield, thereby enabling a significantly higher throughput of digital assets into our facilities and
deliveries to our clients. We have acquired computer systems and local storage devices to support our new mastering service. Our
Sheffield headquarters has been relocated to larger, more suitable premises and we have refitted our facilities in Los Angeles and
London. New facilities in Dubai and Copenhagen have been fitted out.
International locations
We have completed capital efficient investments in Ares Media (Turkey) and Whatsub Pro (South Korea) and we have acquired the
business of Vista India. A hub for Scandinavian operations has been opened in Denmark. We have in our pipeline several opportunities
that we expect to complete and announce in due course.
Expansion of services
We have recruited heavily throughout the period and have added a mastering team in Los Angeles, and a larger business development
team that now includes advocates in Southeast Asia and the Middle East.
Expansion of capacity
We have expanded our R&D team in ZOO Digital Labs, including the new position of Research Manager, such that we are now able
to pursue internal research projects. In anticipation of strong growth for dubbing we have enlarged our project management team
significantly by recruiting ahead of higher levels of orders being received. We have assembled a team to work on mastering.
Outlook
Trading in the first quarter of FY23 has been very strong with sequential growth over FY22Q4 and significantly ahead of the equivalent
period in the prior year. The period has included work that is related to ongoing territory launches of major streaming platforms as well as
the processing of significant volume of new original titles that have been completed and adapted into an increasing number of languages
for global distribution. Visibility through until the end of H1 indicates further significant progress towards the goal that we set in 2020 of
delivering sales of $100 million. We expect H1 sales to exceed the second half of the prior year which was in turn 60% ahead of FY22H1.
We are in dialogue with multiple streaming platform operators concerning the adoption of ZOOstudio to manage global distribution
operations and are increasingly confident of adding to licensees during FY23.
We expect that the significant investments we have made in building our multilingual dubbing capability and capacity across many
languages will result in strong growth in the year ahead in our localisation revenues. In the previous period this investment has had the
temporary effect of incurring inflated cost of sales for localisation while we have been building additional capacity but we now expect
both to grow sales strongly and expand dubbing margins. The record level of investment across the entertainment industry in new
original content is creating unprecedented demand for localisation and media services. For some services and languages this is already
exposing shortages in capacity that are prompting buyers to place orders with extended notice periods. We expect that this will result in
improving visibility of revenues during FY23.
ZOO’s scalable and efficient technology-enabled services place the company well to capitalise on the industry’s surplus demand.
Consequently, the Board remains confident of continuing to deliver strong growth in the year ahead.
Stuart Green
Chief Executive Officer
Page FINANCIAL REVIEW
Introduction
The last financial year has been truly transformative for the Group as we have laid the
financial foundations to truly scale the business to compete with the largest suppliers
to the global localisation market. In April 2021 we completed a fundraise injecting $10.1
million of cash into the business. This has allowed us to expand our global footprint
through organic growth and also to take strategic stakes in companies operating in
the significant media markets of the world. In September 2021 the 7.5% unsecured
convertible loan note stock was redeemed reducing future liabilities by $3.5 million
and eliminating future interest payments of roughly $0.3 million per annum. The
financial performance in the year has reinforced the financial strength of the business
with an operating profit of $3.1 million contributing to Net Assets growing to $26.2
million (FY21: $2.8 million).
Revenue
The Company achieved revenue growth of 78% in the financial year ended 31 March 2022, with total revenues of $70.4 million compared
to $39.5 million in FY21. This reflects the success of our strategy to focus on being an end-to end supplier of localisation and media
services to the global entertainment streaming providers. As our customers concentrate on their international launches we have
increased our capacity to support the expansion in work required for both the initial launch and the ongoing pipeline of new work
required to grow their subscriber bases.
Most of the Group’s operations are in the United States, where revenues were up 80% at $61.2 million. The balance of work was
performed in Europe which grew by 67% to $9.2 million. The split in geographical production illustrates the international launches of US
based streaming services.
In FY22 we experienced greater customer concentration with the revenue contribution from our largest client increasing to 78% of
sales as a consequence of their international expansion being ahead of their US competitors (FY21: 72%). The second largest customer
accounted for 6%, up from 4% last year. These two contracts are expected to continue long-term due to the close relationship and
technology integration achieved by ZOO.
We report two revenue segments: media production and software solutions.
The media production segment has two revenue streams: localisation and media services. Media localisation revenues increased by
108% in the year to $42.2 million, as the industry came out of the global pandemic and production of new titles returned to normal levels.
As other US streaming services launch their international services and our expanded dubbing service gains traction, we expect strong
future growth in revenues.
Media services revenues increased by 51% as we launched new services including mastering and continued to support further
international launches by our biggest customer.
Software solutions, the segment that has been a reducing proportion of our business, decreased by 1% in the year to $1.8 million. We
believe this segment has another two years before it will reduce significantly.
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 two key reporting segments. This shows that overall gross profit increased to $22.1 million in FY22 from $13.6 million in
FY21, an increase of 63%.
Media localisation contribution grew in the year from $2.9 million to $9.2 million an increase of 217% driven by the revenue growth in both
subtitling and dubbing. The growth in contribution of this stream was higher than that of the revenue as the significant revenue growth
contributed to a higher utilisation of our staff. The contribution percentage of 22% still reflects our investment in people to expand
capacity and will trend upwards in future years.
Media services contribution grew to $15.3 million up 35% on last year. The contribution from this revenue stream of 58% was lower than
the previous year’s margin of 65%, and this is due to the mix of services favouring activities that require a high level of translation services
that have a slightly lower gross margin.
Software solution segment contribution held steady at 93% in the year.
Overall gross profit increased by 62% to $22.1 million compared to $13.6 million in FY21. This represents a gross profit margin of 31%, down
from 35% last year. The deterioration is due to a higher proportion of revenues coming from dubbing and metadata services with a lower
gross margin than the mainstream media services that were the dominant revenue stream in FY21.
Other operating expenses
Operational fixed costs, which are defined as operating expenses less share-based payments, depreciation and amortisation, have
increased by 50% in the year as we invested heavily in people and IT to support our growth plans. Overall, operating expenses increased
to $19.2 million, including share-based payments, depreciation and amortisation and property costs of $1.0 million under IFRS 16. The 49%
increase in operating expenses is explained by the above, higher depreciation and amortisation costs, due to the expansion of office
space and a provision for an onerous lease and the increase in R&D.
Annual Report 2022ZOO Digital Group plc 29
Finance costs
The main component of the Group’s finance costs relates to the conversion into equity of 7.5% convertible loan note stock as they
matured in the year. This gave rise to a final non-cash charge relating to the revaluation of the loan stock on maturity which totalled $1.6
million. Interest on the principal in the year was $0.2 million, down from $0.3 million in FY21. The other component of finance costs is non-
cash items, relating to the Right Of Use asset totalling $0.2 million calculated for IFRS16 purposes.
Despite the non-cash accounting entries, above, the profit before tax for the year ended March 2022 was $1.1 million compared to a loss
of $3.6 million for FY21.
As a result of the increase in revenues and a slight leveraging of our costs, the operating profit of $3.1 million is significantly better than
the profit last year of $1.0 million. On the Company’s preferred measure of profitability, being EBITDA before share-based payments, the
profit was $8.3 million, up from $4.5 million in FY21, an increase of 84%.
The Group has reviewed the recent profitability of its US subsidiary and the expected growth in profits over the next 2 years and has
concluded that it is appropriate to include a deferred tax asset of $1.3 million in this years results to reflect the probable utilization of
unused tax losses in the US subsidiary.
New equity raise
In April 2021 we completed a 10% placing of new equity raising a gross $10.1 million. This money has been 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 ($10.1 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 6 April 2021.
Statement of financial position
Non-current assets more than doubled in the period which is explained by three strategic investments. Firstly, we invested in new
premises in Sheffield to accommodate the significant increase in headcount in the past two years and also to provide expansion for the
next ten years. This investment included $2.1 million in leasehold improvements and $8.0 million increase in the ROU asset. Secondly, we
invested $2.3 million in computer equipment to expand our production capacity and to support the uplift in staff. Thirdly, we invested
$4.3 million in international companies to expand our reach in key geographical locations. This involved acquiring 100% of Vista India, 35%
of Vista USA, 51% of Whatsub Pro in South Korea and 20% of ARES in Turkey. In addition the deferred tax asset has been increased to
reflect the probability of utilising tax losses in the US over the next two years.
The capitalisation of research and development costs increased by 31% to $1.7 million as we accelerated the product roadmap to
support customer requirements and upgrade our internal production systems. This also increased the depreciation charge resulting in the
balance sheet asset increasing by only 1% to $2.6 million.
Trade and other receivables have increased 211% compared to last year to $26.0 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. The increase still only represents 88 debtor days and the majority of the balance has been received
in quarter one of FY23. Contract assets which represents work in progress on customer projects increased 67% to $3.6 million reflecting
the increased activity in quarter four.
Current borrowings have decreased from $9.5m to $1.3 million (excluding lease liabilities). This is due to the conversion of the 7.5%
convertible loan stock in September 2021 into equity which eliminated the loan liability and also eliminated the embedded derivative.
Current liabilities have grown significantly in the period due to the high level of sales in quarter four which has resulted in both trade
payables and accruals increasing to support the cost of sales figure. In addition, the year-end bonus accrual has increased to $1.7 million
(FY21: 0.8 million).
Cash and cash equivalents of $6.0 million at year end (FY21: $2.9 million) were up 107% as a result of the proceeds from the fundraise not
having been completely invested in the capacity increasing projects.
Non-current liabilities, increased significantly in the year due to the increase in the “right to use” liability as our property leases reflected
the long-term commitments arranged in the year in both Sheffield and Los Angeles. The lease in Sheffield runs for 10 years and the new
lease in Los Angeles for 6 years. Non-current leases increased from $1.8 million to $8.0 million as at 31 March 2022.
Consolidated statement of cash flows and going concern
Net cash generated from operating activities was $5.2 million, down from $6.8 million in FY21. The drop of $1.6 million is attributable to
the increase in trade receivables compared to last year only being partly offset by the increase in trade payables and the increase in the
operating profit. The inflow from operating activities was more than offset by a $6.4 million increase in investing activities, which included
an additional $2.1 million spent on property, plant and machinery and the investment in international expansion of $3.9 million. These
outflows were offset by the equity fundraise of $9.6 million closed in April 2021.
Going forward the business remains confident that it has sufficient headroom to trade for the foreseeable future, as the recent
completion of a $5 million invoice discounting facility from HSBC gives us the working capital headroom for the next phase of our
expansion. This is further validated by the strong start to FY23, with record orders which we expect to deliver another operating profit
for FY23 and has been stress 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 87% 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.
Page 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, 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 expanding its human resources department from
three to seven in the past 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 has extended the working from home policy during the last 12 months to embed the flexibility afforded by hybrid
working. This includes policies, health and safety considerations and ensuring hybrid working is a key part of the culture allowing
for fair assessment of all staff irrespective of their working circumstances.
•
•
The Board reviewed the Company’s financial facilities and working capital position approving a working capital facility with our
bankers, HSBC of $5 million. This allows the business to continue to grow rapidly organically.
To address the need to support our customers on a global basis the Board approved three strategic investments in the year that
support our aim to be a global media localisation partner to the major US media corporations.
Political uncertainty
The political climates in the UK and US are currently challenging due to the uncertainty surrounding the post COVID19 economic
environment. Although the terrible situation in the Ukraine is having a major impact on the world economy, the current impact on ZOO is
negligible. 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 and the USA.
By order of the board
Phillip Blundell
Director and Secretary
Annual Report 2022ZOO Digital Group plc 31
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. To further enhance our credentials and to support our future growth we appointed Nathalie
Schwarz as an independent Non-Executive Director on the 13 January 2022. Nathalie has taken over the role of chair of the Remuneration
Committee and is member of the Audit Committee. I am now assisted by Mickey Kalifa and Nathalie Schwarz giving the group three
independent non-executive directors.
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 2022. 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 with
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, Los Angeles, Dubai and Mumbai 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 operated a hybrid working model
allowing staff to working from home delivering uninterrupted service and maintaining the same high standards of quality and
security as well attending the office when required without any interruption in productivity.
Page • 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 have adopted 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 revenue stream 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
Description
Participants
Comments
Apr 21
Stifel Technology conference
May 21
Retail investor webinar
May 21
Retail investor calls
May 21
Institutional investor calls
May 21
Investor newsletter
Jul 21
Preliminary results roadshow and
media meetings
Jul 21
Retail investor meeting
Jul 21
Interactive Investor interview
Aug 21
Investor newsletter
SG, PB
SG, PB
SG
SG, PB
-
SG, PB
SG, PB
SG
-
Sep 21
Analyst meetings
SG, PB
Participated in a virtual investor conference
Gave a virtual presentation to wealth managers and PCBs
Calls with retail investors
Calls with institutional investors
Investor e-newsletter including CEO video distributed to
subscribers
Institutional investors, analysts and PCBs via Zoom calls
Open invitation to retail investors; virtual presentation and
Q&A; recording made and published via website
Video interview with Interactive Investor which was
subsequently published
Investor e-newsletter including CEO video distributed to
subscribers
Meeting with equities analyst at Singer Capital Markets and
Peel Hunt
Actively encouraged all shareholders and prospective
investors to attend a meeting held in person in London and live
streamed; event made available on website subsequently
Sep 21
Oct 21
Oct 21
Oct 21
Nov 21
AGM
SG, PB, GD, GW, MK
Broker sales team meetings
SG, PB
Presented to the sales teams at multiple broking firms
Ad hoc institutional investor
meetings
SG, PB
Met with institutional shareholders on request
Ad hoc retail investor meetings
SG
Met with significant retail investors
Interim results roadshow and
media meetings
Nov 21
Retail investor meeting
Nov 21
Nov 21
Proactive Investor interview
Retail investor presentation
SG, PB
SG, PB
SG
SG
Institutional investors, analysts and PCBs via Zoom calls
Open invitation to retail investors; virtual presentation and
Q&A; recording made and published via website
Video interview with Proactive Investor which was
subsequently published
Presentation to retail investors in York
Dec 21
Broker sales team meetings
SG, PB
Presented to the sales teams at multiple broking firms
Dec 21
Ad hoc institutional investor
meetings
Dec 21
Investor newsletter
Feb 22
Feb 22
Retail investor webinar
Broker sales team meetings
SG
-
SG, PB
SG, PB
Met with institutional shareholders on request
Investor e-newsletter including CEO video distributed to
subscribers
Gave a virtual presentation to wealth managers and PCBs
Presented to the sales teams at multiple broking firms
Annual Report 2022ZOO Digital Group plc 33
Date
Description
Participants
Comments
Feb 22
Investor newsletter
Mar 22
Analyst meetings
Mar 22
Ad hoc institutional investor
meetings
-
SG, PB
SG, PB
Investor e-newsletter including CEO video distributed to
subscribers
Met with analysts in person
Met with institutional shareholders on request
Key: GW: Gillian Wilmot; SG: Stuart Green; PB: Phillip Blundell; GD: Gordon Doran; MK: Mickey Kalifa; NS: Nathalie Schwarz.
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 is compared to the group’s Investor Relations strategy to ensure adherence.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
Stakeholder
Reason for engagement
How we engage
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
Good two-way
communication with staff
is a key requirement for
high levels of engagement,
fostering a culture of
innovation
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.
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
Suppliers – a key supplier group is
our network of freelancers who fulfil
linguistic services
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
Freelance workers will
provide similar services
to other organisations,
including our competitors,
so we must ensure they
are available to us and
accommodating
These have provided insights that have led to enhancement of
management practices and staff incentives.
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.
Page Stakeholder
Reason for engagement
How we engage
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
Industry bodies – the services
we provide must meet certain
requirements
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
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.
Membership of MPAA, MESA, EGA, DPP 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.
Communities – what we do impacts
communities in the places where we
operate and elsewhere
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
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 seek 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 FY2022. 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 FY22 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 FY23, 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.
Annual Report 2022ZOO Digital Group plc 35
ZOO Digital is growing and globalising and as we do, we are committed to ensuring that we’re building a responsible future-focused
business.
Sitting at the very heart of our business model are our cloud-based software platforms which give our customers an energy and
infrastructure efficient way of managing their dubbing services without the need for purpose-built studios. In addition, our unique
approach to fulfilling these services remotely also reduces the time and emissions for voice actors and dubbing directors who would
otherwise need to travel to local studios to work – helping significantly reduce Scope 2 and Scope 3 Greenhouse Gas emissions for us
and our customers.
Building on this core strength, we have been considering other ways that our Group can improve its impact on the environment and
people. We appointed external consultants to help us build a deeper understanding of the environmental, social and governance (“ESG”)
impacts of our business and are now developing a strategic framework for sustainability at ZOO.
During the review, we reached several conclusions that will inform our future sustainability strategy:
•
The need to articulate a clear purpose to supplement our existing Vision and Mission. We recognise that great people are key to
our growth plans and that we need to attract, retain, and develop talented individuals. Having an inspiring purpose that transcends
our business goals, and explains our wider impact in society, will help reinforce the culture and behaviours that will help us deliver
our vision and mission.
• We have identified sixteen material topics that ZOO will focus on, measure and improve in the future, in the areas of Environment,
Social and Governance.
•
These sixteen material topics have been mapped to our three core value pillars as reproduced below to highlight the alignment
of the material topics with ZOO’s culture and the areas where we can make the most difference.
• We are now identifying the workstreams and measurement criteria for the next two years to ensure we codify our strategy and
have the appropriate governance, goals, and targets in place to deliver against it.
Think smarter
Make it easier
Be better
Three Delivery Pillars and the 16 ESG Focus Areas
We enrich the lives of our people and
enhance their skills through access to
industry-leading learning & education
opportunities. [7] [16]
Diversity is critical to our success as
a global business. We want to learn
from those around us and inspire the
next generation of talent to enter the
digital media industry whatever their
background, gender, sexual preference,
cultural identity or ethnicity. [4] [7]
We work to make it easier and more efficient
for customers & freelancers to use our
localisation services. [12]
Disruption favours the brave. We are
always looking for a way to do things
better. [13]
Our unique technology platform means our
customers can localise their content more
cost- effectively, without having to travel. [11]
We relentlessly innovate to meet the future
needs of the entertainment industry. [10] [14]
Our flexible workplace approach enables
collaboration and allows our people to work
in a way that best suits them. [3] [5] [6] [15]
We are daydream believers, making
access to entertainment easier for all and
donating our time and resources to charity
partners working towards the same goal.
[8] [9]
We are determined to minimise our
impact on the planet. [1] [2]
Environmental
1. Reducing carbon footprint
2. Zero Waste and recycling
Social
Governance
9. Charitable support
10. Innovation and R&D
3. Health, Safety & Wellbeing of workforce and freelancers
11. Bespoke client solutions
4. Diversity, Equity & Inclusion
12. Tech driven operational and economical efficiencies
5. Employee empowerment, training & upskilling
13. Ethics, Compliance & Transparency
6. Human Rights
7. Growing new talent
14. Data privacy and cyber security
15. Supply chain engagement
8. Contributing to global accessibility in entertainment
16. Industry & academic partnerships
Over the past 12 months we have consulted internally to update our purpose, mission and values and have landed on a purpose
statement which the staff can buy into and is appropriate for our industry, “Enriching lives through access to entertainment.” This will form
the basis of an ongoing project to reinforce the message and put the purpose at the heart of our activities.
New Social Responsibility Committee
We have set up an internal team headed by a main Board member called the Social Responsibility Committee, which is responsible
for formulating ESG policy, initiatives, and measurement of effectiveness of all ESG programmes. This committee meets at least once
a month and, working with our human resources team, has already prepared the statement of purpose and the 16 material topics. It has
identified three major industry charities that support our purpose and mission, and joint initiatives will commence in the coming year.
The Social Responsibility Committee has also recognised the need to support local communities and this has led to the company-wide
initiative known as “ZOOgooders,” which was recently approved by the main Board and allows all staff to spend two fully paid days a year
to support a charity or local community project.
Page Board-level commitment to diversity, equity and inclusion
Our commitment to sustainability from the Board also includes a focus on diversity, equity and inclusion (DE&I). We recently
commissioned a comprehensive survey into DE&I across the ZOO workforce, which will give us a benchmark from which to measure
future improvements.
This year we also launched ZOO Academy the goal of which is to bring more diverse talent into the industry. We will also soon be
launching an innovative apprenticeship scheme to encourage more young people to become software engineers.
Supporting home working
Our human resources team has been very busy supporting enhanced health and safety procedures in our upgraded offices – offering
support to our working from home initiative and implementing an e-learning platform that is available to all staff to assist in building their
work and life skills.
The introduction of a formal ESG strategy means we can codify and measure how we are improving our impact on these critical topics.
We are excited about developing and executing our ESG strategy over the coming months and years.
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 six directors of which three are executive and three 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 may 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:
Dr. Stuart Green
Gordon Doran
Phillip Blundell
Non-executive Directors
Gillian Wilmot
Mickey Kalifa
Nathalie Schwarz
Board meetings
Audit Committee
Remuneration Committee
Possible
Attended
Possible
Attended
Possible
Attended
11
11
11
11
11
3
11
11
11
11
10
3
–
–
2
2
2
0
–
–
2
2
2
0
2
–
–
2
2
1
2
–
–
2
2
1
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 six 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.
Annual Report 2022ZOO Digital Group plc 37
Gillian Wilmot, Independent Chairman
Term of office: Appointed as Chairman with effect from 1 July 2019; Chair of
the Remuneration Committee until Summer 2022 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 Brighter Beauty
Group, Non-Executive Chairman of JISP.com trading as Bubbles Online Services
Ltd., Director of Board Mentoring Ltd, Non-Executive Chairman of Xpediator
plc.
Time commitment: two to three days per month.
Mickey Kalifa, Independent Non-Executive Director
Term of office: Joined as Non-Executive Director on 13 January 2022; Chair of
the Remuneration Committee from Summer 2022 and member of the Audit
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 digital agency Dept
in in January 2022 having previously held the role of CFO with M&C Saatchi plc,
an LSE listed business, since March 2019. 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 Dept Holding B.V.
Time commitment: one to two days per month.
Nathalie Schwarz, Independent Non-Executive Director
Term of office: Joined as Non-Executive Director on 13 January 2022; Chair of
the Remuneration Committee from Summer 2022 and member of the Audit
Committee.
Background and suitability for the role: Nathalie brings 20 years of board-
level international experience from her roles in both publicly listed and
privately owned companies. She has particular expertise in the media and
digital technology sector with a career spanning broadcasting (television and
radio), mobile and digital interactive platforms and information/data services.
This includes as Group Commercial and Development Director at Channel
4 Television Corporation, overseeing the negotiation of its commercial
partnership with UKTV. She also served as Group Strategy and Development
Director at Capital Radio plc as the FTSE 250 company completed an £800
million merger to create the largest commercial radio analogue and digital group.
A qualified corporate finance lawyer, Nathalie began her career at leading global
law firm Clifford Chance and has since served as Chair of Boards, Remuneration
Committees and Nominations Committees. Her non-executive experience
includes roles at Wilmington plc, Matomy Media plc, BigHand, Optionis and
Amiad Water Systems plc.
Current external appointments: Vice Chair of the International Trade
Association for the Broadcast and Media Industry (IABM)
Time commitment: one to two days per month.
Page 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 22 years as a main board director of AIM-quoted companies.
Current external appointments: 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
13 years.
Current external appointments: None.
Time commitment: full time.
Annual Report 2022ZOO Digital Group plc 39
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
A board evaluation process led by the Chairman took place February 2022. 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 FY22 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 its 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
Page 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 and from 13th January 2022, Nathalie Schwarz. 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.
•
•
Ensure the total reward cost to ZOO are affordable and sustainable.
Ensure that an appropriate proportion of the package is determined by targets linked to the Group’s performance.
Annual Report 2022ZOO Digital Group plc 41
Performance
measure
N/A
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.
Component
Purpose and link to strategy
Operation
Maximum
Base salary
Benefits
Pension
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.
To provide a market
competitive benefits package
To provide an appropriate level
of retirement benefit
Receive benefits in line
with market practise, these
include death in service
plus health care in the US.
Executive Directors are
eligible to participate in the
Group’s pension scheme.
Set a level deemed
appropriate by the
Remuneration committee
N/A
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
Shareholdings
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.
To promote share ownership for
Executive Directors
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.
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
Page Advisers
Company Secretary and Registered Office
Phillip Blundell
ZOO Digital Group plc
Floor 2
Castle House
Angel Street
Sheffield
S3 8LN
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
Molex House
Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX
Solicitors
DLA Piper UK LLP
1 St Paul’s Place
Sheffield
S1 2JX
Annual Report 2022ZOO Digital Group plc 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 2022.
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 27.
The audited financial statements for the year ended 31 March 2022 are set out on pages 57 to 98. 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. (2021:nil)
Going concern
The directors have prepared trading and cash flow forecasts for the group for the period to 31 March 2024 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 HSBC Bank which provides invoice
financing of up to $5.0 million against US clients invoices raised by ZOO Digital Production LLC. This facility was arranged on the 1 July
and runs until 30 June 2023. In the UK there is an overdraft facility with a limit of £250,000 ($345,000) in place with HSBC.
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
Nathalie Schwarz
Non-Executive Chairman
Chief Executive Officer
Chief Finance Officer
Chief Commercial Officer
Non-Executive Director
Non-Executive Director appointed 13 January 2022
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 2022 are disclosed in the Directors’ Remuneration report. In accordance with the company’s
Articles of Association, Nathalie Schwarz and Stuart Green retire by rotation at the next Annual General Meeting and, being eligible, offer
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 31.
Substantial shareholdings
At 6 April 2022, 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:
Page Name of holder
Canaccord Genuity Group Inc
Dr S A Green*
Herald Investment Trust plc
Invesco Ltd
Stonehage Fleming IM Limited LLC
*Shareholdings of directors include any interests of a “connected person”.
Percentage
held
14.61%
12.80%
12.28%
8.06%
4.68%
Number
12,903,972
11,308,972
11,291,978
7,119,184
4,130,489
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 6th July 2022
Phillip Blundell
Director and Secretary
Annual Report 2022ZOO Digital Group plc 45
Remuneration Committee report
I am pleased to present the remuneration committee report for FY2022, which sets out the remuneration earned and paid to Directors in
the year ended March 2022.
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 46 to 48 provides details of the amounts earned in respect of the year ended 31
March 2022 and how Directors’ Remuneration Policy has operated and will be subject to an advisory shareholder vote at the 2022 AGM.
Review of the year ended 31 March 2022.
As described earlier in the annual report, the Company has exceeded its financial goals for the year, achieving revenue growth of 78% and
EBITDA growth of 84%. As a result of this performance the Executive Directors achieved an annual cash bonus of 175% of their on-target
earnings which is between 91% and 99% of their base salary.
In the period 1,000,000 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 150,000 share options, Gordon Doran was awarded 150,000 share options, both grants were at the prevailing market price on the
date of grant of 130.0p. 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 FY2023
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 2023:
•
The committee determined it was appropriate to increase the base salaries of the 3 Executive Directors by a range of 8% - 18%
to reflect market rates for similar companies, recognising that there is high inflation and the average companywide increase of 8%.
• After reviewing the annual cash bonus provision, the committee felt it appropriate to leave the on-target earnings percentage at
an average of 54% of base salary. This mirrors similar schemes at comparable companies.
•
The committee has agreed to review the broader remuneration policy and a report will be produced in due course.
On behalf of the Board
Gillian Wilmot
Chairman of the Remuneration Committee
Page 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 2022 the Remuneration Committee consisted of all non-executive directors, with Nathalie Schwarz
joining on 13 January 2022, and was chaired by Gillian Wilmot. After a brief handover the chair will be assumed by Nathalie Schwarz
during summer 2022.
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
•
• Discretionary bonus
•
Share options
Private medical insurance
Non-executive directors
Gillian Wilmot, Mickey Kalifa and Nathalie Schwarz are paid as employees for their board services.
Directors’ remuneration
Directors’ remuneration for the year to 31 March 2022 is:
Dr Stuart A Green
Gordon Doran
Phillip Blundell
Gillian Wilmot
Mickey Kalifa
Nathalie Schwarz*
Salary
$000
310
350
246
74
48
10
Bonus
Benefits
Sub total
Pension
$000
$000
$000
$000
296
350
210
-
-
-
-
26
-
-
-
-
606
726
456
74
48
10
* Nathalie Schwarz was appointed on 13 January 2022
1,038
856
26
1,920
2022
Total
$000
615
726
456
74
50
10
2021
Total
$000
473
449
323
103
34
-
1,931
1,382
9
-
-
-
2
-
11
Of the above, the following directors were remunerated in pound sterling for the year to 31 March 2022. The pound sterling amounts are
shown below:
Dr Stuart A Green
Phillip Blundell
Gillian Wilmot
Mickey Kalifa
Nathalie Schwarz
Gordon Doran is remunerated in US dollars.
Salary
£000
226
180
60
35
8
509
Bonus
Sub total
Pension
£000
226
163
-
-
-
389
£000
452
343
60
35
8
898
£000
6
-
-
1
-
7
2022
Total
£000
458
343
60
36
8
905
2021
Total
£000
355
244
75
26
-
452
Annual Report 2022ZOO Digital Group plc
47
Two directors (2021: two) 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.
2022
$000
726
2021
$000
473
Directors’ share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the company
granted to or held by the directors. Details of the options are as follows:
Granted
during the
year
Exercised
during the
year
Sur-
rend-ered
during the
year
31 March
2022
Exercise
price ($)
Exercise
price (£)
Date from
which
exer-
cise-able
1 April
2021
150,000
175,000
150,000
250,000
1,500,000
1,000,000
30,000
150,000
50,000
110,000
400,000
Name of
director
Stuart A Green
Stuart A Green
Gordon Doran
Gordon Doran
Gordon Doran
Gordon Doran
Mickey Kalifa
Phillip Blundell
Gillian Wilmot
Gordon Doran
Phillip Blundell
Gordon Doran
Phillip Blundell
-
-
150,000
150,000
3,965,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
175,000
150,000
250,000
1,500,000
1,000,000
30,000
150,000
50,000
110,000
400,000
150,000
150,000
4,265,000
$0.23
$0.20
$0.23
$0.23
$0.20
$0.20
$0.49
$0.80
$0.80
$0.89
$0.89
$1.76
$1.76
15.00p*
15.25p**
15.00p*
15.00p
15.25p**
15.25p***
37.50p
63.00p
63.00p
72.5p****
72.5p****
1.30****
1.30****
Jul-13
Sep-17
Jul-13
Jan-16
Sep-17
Aug-18
Oct-18
Jun-20
Jun-20
May-21
May-21
Jan-23
Jan-23
Expiry
date
Jul-22
Aug-27
Jul-22
Jan-25
Aug-27
Aug-27
Oct-27
Jun-29
Jun-29
May-30
May-30
Jan-32
Jan-32
* 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 which
was achieved in FY22.
**** The share options granted in the year and FY21 have a vesting condition relating to the profitability of the group.
The exercise of share options granted prior to 31 March 2021 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 $88,000 (2021: $138,000).
The market price of the ordinary shares at 31 March 2022 was 158 cents (120.5p) and the range during the year was 209 cents (151p) (high)
to 126 cents (96.4p) (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.
Page
Name of director
Executive directors
Dr Stuart A Green
Phillip Blundell
Gordon Doran
Non-executive directors
Gillian Wilmot
Mickey Kalifa
Nathalie Schwarz
Date of appointment
Notice period
28 January 2000
8 August 2018
28 July 2009
1 July 2019
5 October 2017
13 January 2022
12 months
6 months
12 months
3 months
3 months
3 months
Directors’ interests
The directors who held office at 31 March 2022 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
2022
2021
Beneficial
Beneficial
31,517
31,517
11,308,972
11,535,997
80,000
6,033
50,000
75,000
6,033
50,000
Shares are held on behalf of two of the directors in the long-term incentive plan.
On the 22 September 2021, Mrs Sara Green, the wife of Stuart Green, the CEO and Director of ZOO, converted the loan stock she held,
amounting to the principal sum of £614,500 into 1,280,208 New Ordinary Shares at a price of 48.0 pence per Ordinary share.
On the 3 December 2021, Dr. Stuart Green, Chief Executive, sold 1,500,000 Ordinary Shares of 1 penny each in the Company (“Ordinary
Shares”) at a price of 123.0 pence per Ordinary Share, bringing his total holding to 11,308,972.
On 8 April 2022 Phillip Blundell purchased 5,000 ordinary shares at 118.0 pence per share bringing his total holding to 80,000.
No other transactions have taken place with directors.
No changes (other than noted above) took place in the interests of directors between 31 March 2021 and 30 June 2022.
Annual Report 2022ZOO Digital Group plc
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 2022 which comprises 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 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 UK-adopted international accounting standards 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 2022 and
of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
the parent company financial statements have been properly prepared in accordance with UK adopted international accounting
standards 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 our results 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.
Page Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: $470,000, which represents 0.75% of the group’s expected revenue at the
planning stage.
Parent company: $188,000, which represents 1% of the parent company’s total asset
balance at planning, capped at component materiality.
Materiality
Key audit
matters
Key audit matters for the group 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 2021 included no key audit matters that
have not been reported as key audit matters in our current year’s report.
Scoping
We did not identify any key audit matters relating to the audit of the financial
statements of the parent company in addition to those above, identified for the group.
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 100% profit before tax was subjected to full scope
procedures with 94% 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
Annual Report 2022ZOO Digital Group plc In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
51
High
Potential
financial
statement
impact
Accruals
Equity transactions
Advances to
subsidiaries
Business combinations
Impairment of Goodwill
and other intangible assets
Intangible
assets
Trade
receivables
Revenue recognition
(including contract
assets and liabilities)
Going concern
Management override
of controls
Capital
expenditure
Employee remuneration
Cash and bank
Low
Low
IFRS 16
Balances
Borrowings
Share based
payments
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
Key Audit Matter – Group
How our scope addressed the 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 and error.
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 2022 was $70,403,000
(2021: $39,525,000).
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 contracts which are open at
the year end. There is a significant risk
that management may record revenue
fictitiously or in advance of the criteria
for revenue recognition being satisfied.
Revenue recognition is susceptible to
management bias which heightens this
risk.
In responding to the key audit matter, we performed the following audit procedures:
•
• walking through the process and controls around the recording of revenue to
understand the design and implementation of controls;
•
•
•
assessing whether the revenue recognition policy is in accordance with IFRS
15 ‘Revenue from Contracts with Customers’ by comparing policies to IFRS 15
requirements, assessing the disclosures made and agreeing a sample of revenue
recorded in the period to supporting documentation and assessing adherence to the
policy adopted;
testing the operating effectiveness of the relevant controls surrounding revenue
recognition for the group’s main revenue stream by observing the relevant control log;
selected a sample of contract revenue to determine whether the contracts have
been 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; and
• Analytically reviewing sales, including trend and ratio analysis comparing results to
prior year.
Page
Key Audit Matter – Group
How our scope addressed the matter – Group
Our results
Based on the work we have undertaken we have not identified any material misstatements in
revenue recognition.
Relevant disclosures in the Annual
Report and Accounts 2021
•
•
•
Financial statements: Note 2,
Accounting Policies
Financial statements: Note 5,
Revenue
Financial statements: Note 27,
Contracts with customers
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
In responding to the key audit matter, we performed the following audit procedures:
We have identified a key audit matter
related to going concern as one of
the most significant assessed risks of
material misstatement due to error
as a result of the judgement required
to conclude whether a material
uncertainty related to going concern
exists.
The current economic climate for
the UK and US remains uncertain
following significant events across the
world, both ongoing and in the recent
past. 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.
The group is also managing its cash
flow levels to ensure it has sufficient
cash to meet obligations while
managing working capital challenges
aligned with the growth of the group.
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.
Relevant disclosures in the Annual
Report and Accounts 2021
Financial statements: Note 2,
accounting policies
• walking through the process and controls around the going concern assessment and
budget process to understand the design and implementation of controls;
— obtaining management’s forecasts covering the period to March 2024, including
their assessment of the 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 the future cash balance and any significant cash inflows which are
included within these forecasts;
— corroborating post year end events which support the going concern assumption
to relevant documentation and evaluated of their application in the forecasts for
accuracy;
— performing sensitivity analysis on the forecasts, including obtaining management’s
reverse stress test, to determine the reduction in revenue that would lead to
elimination of the headroom in their original cash flow forecasts;
— evaluating the performance of post year end trading against forecast
performance in both the United Kingdom and the United States; and
— assessing the adequacy of the going concern disclosures included within the
financial statements.
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.
Annual Report 2022ZOO Digital Group plc 53
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
$470,000 which is 0.75% of Group expected
revenue for the year at the planning stage.
$188,000 which is 1% of the total assets of the
parent entity, capped at component materiality.
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.
• 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.
We reassessed the materiality determined
at planning based on the year end final
performance to consider whether the
materiality determined remained appropriate
based on all relevant benchmarks.
Materiality for the current year is higher than the
level that we determined for the year ended 31
March 2021 to reflect the improvement in the
performance of the group during the year which
has led to the group’s financial position also
strengthening.
•
•
Total assets is considered the most
appropriate performance measure
to the stakeholder of the parent
company based on there being no
trade through the parent company and
the parent company acts as a holding
company and therefore balance sheet
benchmarks are most relevant. .
The percentage of 1% was selected
based on the risk profile of the entity as
a component within a listed entity.
We reassessed the materiality determined at
planning based on the year end final position to
consider whether the materiality determined
remained appropriate based on all relevant
benchmarks.
Materiality for the current year is higher than the
level that we determined for the year ended
31 March 2021 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
$352,500 which is 75% of financial statement
materiality.
$141,000 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
We determined a lower level of specific
materiality for the following areas:
We determined a lower level of specific
materiality for the following areas:
Directors’ remuneration
Directors’ remuneration
Related party transactions
Related party transactions
Page Materiality measure
Group
Parent company
Communication of
misstatements to the audit
committee
Threshold for communication
We determine a threshold for reporting unadjusted differences to the audit committee.
$23,500 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
$9,400 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
$70,403,000
PM
$352,500
75%
FSM
$470,000,
0.7%
TFPUM
$117,500
25%
Total assets
$49,674,000
PM
$141,000,
75%
FSM
$188,000
0.2%
TFPUM
$47,000, 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 seven components within the group of which three 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
subsidiaries.
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 one of the subsidiary undertaking 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 all the other entities within the Group (ZOO Digital Inc, ZOO Employee Share Trust Limited,
Vista India Digitek Private Limited and Vista Tanweer Studios Private Limited).
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 100% of total profit before tax. This approach was consistent with
the prior year; and of the group’s total asset balance 6% was subject to analytical procedures.
Communications with component auditors
there were no component auditors involved in the group audit. All audit work performed by the group auditor.
Annual Report 2022ZOO Digital Group plc 55
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 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
Page 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 group’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.
•
The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement
team included consideration of the engagement team’s:
— understanding of, and practical experience with, audit engagements of a similar nature and complexity, through appropriate
training and participation;
— knowledge of the industry in which the Group and parent company operate; and
— understanding of the legal and regulatory frameworks applicable to the Group and the parent company.
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.
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting
irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion,
deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is
from events and transactions reflected in the financial statements, the less likely we would become aware of it.
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
6 July 2022
Annual Report 2022ZOO Digital Group plc CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2022
Revenue
Cost of sales
Gross Profit
Other operating income
Other operating expenses
Operating profit
Analysed as:
EBITDA before share based payments
Share based payments
Depreciation (net of grant) and impairment
Amortisation
Exchange loss on borrowings
Fair value movement on embedded derivative
Finance cost
Total finance costs
Profit/(loss) before taxation
Tax credit
Profit/(loss) and total comprehensive income for the year attributable to
equity holders of the parent
Note
5
6
8
8
8
8
7
7
7
11
2022
$000
70,403
(48,296)
22,107
204
(19,165)
3,146
8,326
(513)
(3,008)
(1,659)
3,146
(5)
(1,567)
(519)
(2,091)
1,055
1,573
2,628
57
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)
Profit/(loss) per share
basic
diluted
13
3.10 cents
2.80 cents
(4.24) cents
(4.24) cents
The notes on pages 64 to 98 are an integral part of these consolidated financial statements.
Page
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2022
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Equity accounted investments
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
Other payables
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
18
19
20
27
22
26
27
25
25
25
26
24
24
24
24
24
24
24
24
24
2022
$000
13,317
9,514
4,154
1,846
28,831
25,992
3,647
5,962
35,601
64,432
(27,638)
(774)
(1,313)
-
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)
(29,725)
(20,252)
(7,830)
(619)
(8,449)
(38,174)
26,258
1,174
55,665
(992)
5,471
2,619
6,753
(49)
12,320
(56,703)
26,258
(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
The notes on pages 64 to 98 are an integral part of these consolidated financial statements.
The financial statements on pages 57 to 98 were approved and authorised for issue by the board of directors on 6 July 2022 and were
signed on its behalf.
Stuart A Green
Chief Executive Officer
Phillip Blundell
Chief Finance Officer
Annual Report 2022ZOO Digital Group plc
COMPANY STATEMENT OF FINANCIAL POSITION
as at 31 March 2022
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associated undertakings
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
Other payables
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
Note
14
16
18
29
20
20
22
26
25
25
25
26
24
24
24
24
24
24
24
24
24
2022
$000
4,336
2,281
4,052
12,700
26,095
49,494
480
30
510
49,974
(9,314)
(9,795)
-
(19,109)
(2,527)
(600)
(3,127)
(22,236)
27,738
1,174
55,665
(13)
5,471
2,619
6,753
(4)
10,596
(54,523)
27,738
59
Restated
2021
$000
444
2,281
-
9,700
18,100
30,525
455
89
544
31,069
(5,658)
(13,343)
(4,452)
(23,453)
-
-
-
(23,453)
7,616
1,010
41,003
(13)
42
2,085
6,753
(4)
10,596
(53,856)
7,616
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 $667,000 (2021: loss of $4,625,000).
The notes on pages 64 to 98 are an integral part of these consolidated financial statements.
The financial statements on pages 57 to 98 were approved and authorised for issue by the board of directors on 6 July 2022 and were
signed on its behalf.
Stuart A Green
Chief Executive Officer
Phillip Blundell
Chief Finance Officer
Page
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2022
Ordinary
shares
Share
premium
reserve
$000
1,010
$000
41,003
Foreign
exchange
translation
reserve
$000
(992)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5)
-
-
Convertible
loan note
reserve
Share
option
reserve
Capital
redemption
reserve
Other
reserves
Accumulat-
ed losses
Interest in
own shares
$000
42
-
-
-
-
-
-
$000
1,375
61
649
710
-
-
-
$000
6,753
$000
12,320
$000
(56,168)
$000
(46)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,163)
(3,163)
-
-
-
-
-
-
Total
$000
5,297
61
649
710
(5)
(3,163)
(3,163)
1,010
41,003
(997)
42
2,085
6,753
12,320
(59,331)
(46)
2,839
Balance at 1 April
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
Issue of Share Capital
164
14,662
-
-
-
-
164
14,662
-
-
-
-
-
-
-
-
-
-
5
-
5
5,429
-
-
5,429
-
-
-
-
21
513
534
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,628
2,628
-
-
-
-
(3)
-
(3)
20,255
21
513
20,789
2
2,628
2,630
Share options
exercised
Share based
payments
Transactions with
owners
Foreign exchange
translation adjustment
Profit for the year
Total comprehensive
income for the year
Balance at 31 March
2022
1,174
55,665
(992)
5,471
2,619
6,753
12,320
(58,018)
(49)
26,258
Annual Report 2022ZOO Digital Group plc
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2022
Share
premium
reserve
Foreign
exchange
translation
reserve
Ordinary
shares
Convertible
loan note
reserve
Share
option
reserve
Capital
redemption
reserve
Other
reserves
Accumulat-
ed losses
Interest in
own shares
$000
$000
$000
$000
$000
$000
$000
$000
$000
1,010
41,003
-
-
1,010
41,003
-
-
-
-
-
-
-
-
-
-
-
-
1,010
164
41,003
14,662
-
-
-
-
164
14,6629
-
-
-
-
(13)
-
(13)
-
-
-
-
-
-
(13)
-
-
-
-
-
-
42
-
42
-
-
-
-
-
-
42
5,429
-
-
5,429
-
-
1,375
6,753
10,596
(52,138)
-
-
-
2,907
1,375
6,753
10,596
(49,231)
61
649
710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,941)
316
(4,625)
(4)
-
(4)
-
-
-
-
-
-
2,085
6,753
10,596
(53,856)
(4)
-
21
513
534
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(667)
(667)
-
-
-
-
-
-
Balance at 1 April 2020
as previously stated
Impact of correction
of errors
Restated balance at 1
April 2020
Share options
exercised
Share based payments
Transactions with
owners
Loss for the year
Impact of correction
of errors
Total comprehensive
income for the year
Restated balance at 31
March 2021
Issue of share capital
Share options
exercised
Share based payments
Transactions with
owners
Loss for the year
Total comprehensive
income for the year
Balance at 31 March
2022
1,174
55,665
(13)
5,471
2,619
6,753
10,596
(54,523)
(4)
27,738
61
Total
$000
8,624
2,907
11,531
61
649
710
(4,941)
316
(4,625)
7,616
20,255
21
513
20,789
(667)
(667)
Page CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2022
Cash flows from operating activities
Operating profit for the year
Depreciation and impairment
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 Investments
Acquisition of subsidiaries
Purchase of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Proceeds from fund raise
Repayment of principal under lease liabilities
Finance cost
Share options exercised
Share issue costs
Issue of share capital
Net cash inflow/(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
The notes on pages 64 to 98 are an integral part of these consolidated financial statements.
Note
14
16
16
16
18
17
14, 19
22
2022
$000
3,146
3,022
1,659
513
(18,453)
15,337
5,224
258
5,482
(58)
(1,675)
(953)
(3,000)
(4,377)
(10,063)
(531)
-
10,107
(1,268)
(348)
21
(551)
164
7,594
3,013
2,949
5,962
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
Annual Report 2022ZOO Digital Group plc
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 March 2022
Cash flows from operating activities
Operating profit/(loss) 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 investments
Acquisition of subsidiaries
Purchase of property, plant and equipment
Net cash flow from investing activities
Cash flows from financing activities
Proceeds from fund raise
Repayment of borrowings
Repayment of principal under lease liabilities
Finance cost
Share issue costs
Share options exercised
Issue of share capital
Net cash flow from financing
Net (decrease)/increase 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
63
Restated
2021
$000
(817)
313
1
649
(4,461)
5,002
687
-
687
-
-
(241)
(241)
-
(64)
(121)
(258)
-
61
-
(382)
64
25
89
Note
14
16
18
17
14
22
2022
$000
1,073
1,096
-
513
(8,020)
2,422
(2,916)
-
(2,916)
(1,162)
(3,000)
(2,284)
(6,446)
10,107
(44)
(181)
(213)
(551)
21
164
9,303
(59)
89
30
The notes on pages 64 to 98 are an integral part of these consolidated financial statements.
Page
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2022
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 Floor 2 Castle House, Angel Street, 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 UK adopted 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 2024 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 HSBC Bank which provides invoice financing of up to $5m against US clients invoices raised by ZOO
Digital Production LLC. This facility is in place until 1 July 2023.
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 2021
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 2022 but not yet effective and have not yet been adopted
early by the Group
At the date of authorisation of these financial statements, there are no new, but not yet effective, standard, amendments
to existing standards, or interpretations that have been published by the IASB that will have a material impact on these
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.
The Group applies the acquisition method when accounting for business combinations. The consideration transferred by the
Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities
incurred and equity interests issued the Group, which includes the fair value of any asset or liability arising from a contingent
consideration arrangement. Acquisition costs are expensed as incurred.
Assets acquired and liabilities assumed are generally measured at their acquisition date fair values.
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.
Annual Report 2022ZOO Digital Group plc
65
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 2022 was 0.762 (2021: 0.726).
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.
Page 2.6.1 Joint ventures and associates
Joint ventures are all entities in which the Group has shared control with another entity, established by contractual
agreement. Associates are all entities over which the Group has significant influence but not control, generally
accompanied by a share of between 20% and 50% of the voting rights. Joint ventures and associates are accounted for
using the equity method of accounting and are initially recognised at cost. The Group’s share of the profits or losses is
recognised in the Consolidated Statement of Comprehensive Income. If the share of losses equals its investment, the
Group does not recognise further losses, except to the extent that there are amounts receivable that are long-term and
may not be settled in the foreseeable future. Unrealised gains on transactions between the Group and its joint ventures
and associates are eliminated to the extent of the Group’s interest in them. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred. The accounting policies of the joint ventures
and associates are consistent with those of the Group.
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
— Office equipment, fixtures and fittings
— Production equipment
5 years or over the term of the lease, if shorter
between 2 and 5 years
between 2 and 3 years
between 2 and 3 years
2.8 Impairment of non-current 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.
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 transaction price 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”. 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.
Annual Report 2022ZOO Digital Group plc
67
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 short-term 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.
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 scheme rules.
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.
ZEST holds shares for employees only. Its statement of financial position is consolidated within the Group.
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.
Page Revenue is measured at transaction price, stated net of VAT and other sales related taxes.
Revenue is recognised over time as the group satisfies performance obligations by transferring the promised services to its
customers.
A contract asset must be recognised if the Group recorded revenue for fulfilment of a contractual performance obligation
before the customer paid consideration or before – irrespective of when payment is due – the requirements for billing and thus
the recognition of a receivable exist.
A contract liability must be recognised when the customer paid consideration or a receivable from the customer is due before
the Group fulfilled a contractual performance obligation and thus recognised revenue.
2.12.1 Sales of services
Service revenue is recognised in accordance with the transfer of control 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.Performance obligations within each contract
are separated to identify distinct elements to which transaction prices are allocated. 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.
The revenue stream forms the Media Production segment.
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 series of distinct goods and services that are all
substantially the same and have the same pattern of transfer to the customer, 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. As the licence is identified as the dominant element of the contract, these contracts have
been accounted for as a single performance obligation over the term of the licence as a result of the customer having a
right to access the licence. This revenue stream forms the Software Solutions revenue stream.
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.
Annual Report 2022ZOO Digital Group plc 69
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 inborrowings.
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.
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.
Page 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 31)
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.
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.
Allocation of acquisition price of Vista investment
The methodology for the split of the investment of $6m into the three entities was that the two service businesses were worth 1
times their combined revenues and the balance represents the negotiated price with the Vendors for the 35% of future profits of
the US entity, its customer relationships, the ongoing participation of the founders and the Indian brand value.
Accounting for IFRS 16 – new leases
The group obtained a professional valuation from Mazars Quantitative Solutions (MQS) to determine the discount rate implicit
in the lease. This rate was used to ascertain the fair value of the new leases. Management have estimated the most likely term
varies from 4 to 10 years.
Share based payments
The group obtained a professional valuation from Mazars Quantitive Solutions (MQS) to determine the fair value of the share
options granted in the year. This was used to calculate the amounts recognised through the statement of financial position for
the year to 31 March 2022.
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.
Annual Report 2022ZOO Digital Group plc 71
Intercompany non-current asset classification
The amounts owed by subsidiary undertakings as non-current assets because the Group is still in an investment phase and does
not expect or require it’s subsidiaries to repay its debts to the Group in the next 12 months.
4. Segmental reporting
Operating segments
At 31 March 2022, the group is organised on a worldwide basis into two main operating segments:
— Segment 1 – Media Production – being localisation and media services
— Segment 2 - Software solutions
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 media production segment generates revenue which is reported as “Localisation”
and “Media Services”. Both types of revenue are interdependent and are generated by the same processes, people and assets,
accordingly are considered to represent one segment.
Note that the new acquisitions are not included in the Operational Segments for 2022 as they have not been included in the
statement of comprehensive income based on materiality.
The segment results are as follows:
Media Production
Localisation
Media services
Software solutions
Total
2022
$000
2021
$000
2022
$000
2021
$000
Total revenue
49,573
23,699
26,425
17,466
Inter-segment revenue
(7,387)
(3,438)
-
Revenue
42,186
20,261
26,425
Segment contribution
9,173
2,946
15,330
-
17,466
11,365
2022
$000
1,792
-
1,792
1,660
Unallocated cost of sales
Gross profit
Unallocated corporate expense
Operating Profit
Finance cost
Profit/(loss) before taxation
Tax on profit
Profit/(loss) for the year
Geographical areas
2021
$000
1,798
2022
$000
2021
$000
77,790
42,963
-
(7,387)
(3,438)
1,798
1,693
70,403
39,525
26,163
(4,056)
22,107
16,004
(2,361)
13,643
(18,961)
(12,681)
3,146
962
(2,091)
(4,533)
1,055
1,573
(3,571)
408
2,628
(3,163)
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.
Page
United Kingdom (domicile)
US
Revenue
Total assets
Non-current assets
2022
$000
9,179
61,224
70,403
2021
$000
5,492
34,033
39,525
2022
$000
31,476
32,956
64,432
2021
$000
12,168
12,682
24,850
2022
$000
26,083
2,748
28,831
2021
$000
4,479
7,181
11,660
At 31 March 2022, contract assets amounted to $3.6m (2021: $2.2m) and contract liabilities amounted to $0.8m (2021: $0.8m). Revenue
for the year ended 31 March 2022 includes $0.5m (2021: $0.7m) 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:
2022
$000
68,611
1,792
70,403
2021
$000
37,727
1,798
39,525
For the year ended 31 March 2022
Service
Licensing
United Kingdom
USA
Europe
Other countries
United Kingdom
USA
Europe
Other countries
1,792
70,403
For the year ended 31 March 2021
Service
Licensing
$’000
49
1,735
-
8
$’000
45
1,741
-
12
Total
$’000
3,986
64,573
764
1,080
Total
$’000
1,268
36,532
1,006
719
$’000
3,937
62,838
764
1,072
68,611
$’000
1,223
34,791
1,006
707
37,727
The group’s revenue disaggregated by pattern of revenue recognition is as follows:
Services transferred over time
For the year ended 31 March 2022
Service
Licensing
$’000
68,611
$’000
1,792
Total
$’000
70,403
1,798
39,525
Annual Report 2022ZOO Digital Group plc
73
For the year ended 31 March 2021
Service
Licensing
$’000
37,727
$’000
1,798
Total
$’000
39,525
Services transferred over time
Major clients
The group has two major customers contributing 78% and 6% (2021: 72% and 4%) of the group’s revenue respectively. The debtor
receivable balance as at 31 March 2022 for the two largest clients was $18m. The revenues are as follows:
Largest two clients
Other clients
6. Other operating income
Grant Funding (Sheffield City Council and Innovate UK)
Other operating income
7. Finance costs
Interest on borrowings
Interest on lease liabilities
Fair value movement on embedded derivative
Exchange loss on borrowings
Finance costs
2022
$000
58,905
11,498
70,403
2022
$’000
204
204
2022
$’000
288
231
519
1,567
5
2,091
2021
$000
30,077
9,448
39,525
2021
$’000
188
188
2021
$’000
452
248
700
3,474
359
4,533
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.
8. Operating profit/loss
Group operating profit/loss for the year is stated after charging/ (crediting) the following:
Other exchange (gains)/losses
Staff costs (indirect)
Capitalised staff costs
Share based payment
Depreciation
Impairment re Citygate right of use asset
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
2022
$000
(98)
9,973
(1,675)
513
2,411
611
(14)
1,659
278
129
5,378
19,165
2021
$000
96
7,025
(1,274)
649
1,715
-
(13)
1,221
320
91
3,039
12,869
Page
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
10. Employees including directors
The average number of employees (including executive directors) was:
2022
$000
104
18
7
129
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
Company
2022
No.
320
10
23
353
2021
No.
225
9
16
250
2022
No.
110
6
14
130
Group
Company
2022
$’000
24,462
2,257
259
513
27,491
2021
$000
16,926
1,177
200
649
2022
$’000
3,560
226
130
371
18,952
4,287
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
This includes all directors listed on pages 37 and 38 and senior management.
Group
Company
2022
$000
2,452
11
120
2,583
2021
$’000
1,739
9
211
1,959
2022
$000
1,196
11
88
1,295
2021
$000
69
18
4
91
2021
No.
62
5
10
77
2021
$000
2,011
144
95
574
2,824
2021
$’000
924
9
167
1,100
Annual Report 2022ZOO Digital Group plc
Directors’ remuneration for the year to 31 March 2022 is:
Dr Stuart A Green
Gordon Doran
Phillip Blundell
Mickey Kalifa
Gillian Wilmot
Nathalie Schwartz*
*appointed 13 January 2022
Salary
$000
310
350
246
48
74
10
Bonus
$000
296
350
210
-
-
-
1,038
856
Benefits
Pension
$000
$000
-
26
-
-
-
-
26
9
-
-
2
-
-
11
75
2021
Total
$000
473
449
323
34
103
-
2022
Total
$000
615
726
456
50
74
10
1,931
1,382
Two directors (2021: two) 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
11. Income tax
Current tax:
UK corporation tax
- Research and development tax credit
US tax
Total current tax
Total deferred tax
Tax credited
Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the year.
2022
$000
726
2022
$000
(410)
152
(258)
(1,315)
(1,573)
2021
$000
473
2021
$000
(408)
-
(408)
-
(408)
Page
Tax charge for the year
The tax charge for the year can be reconciled to the loss for the year as follows:
Profit/(loss) before tax
Tax calculated at standard rate of corporation tax of 19% (2021: 19%)
Research and development tax credit
US tax
Deferred tax asset initially recognised
(Deducted from)/accumulation of unrecognised losses brought forward
Tax credited
2022
$000
1,055
200
(410)
152
(1,315)
(200)
(1,573)
2021
$000
(3,571)
(678)
(408)
-
-
678
(408)
Tax losses carried forward
The group has tax losses carried forward of approximately $38.1m (2021: $45.7m), of which $2.6m (2021: $3.4m) has been recognised
at a rate of 25% (UK) and 30% (US) 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.
12. Dividends
There were no dividends paid or proposed.
13. Profit/(loss) per share
Earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the company by the weighted average
number of ordinary shares in issue during the year.
Profit/(loss) 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
Diluted
Basic and Diluted
2022
$000
2,628
2022
2021
$000
(3,163)
2021
Number of
shares
Number of
shares
85,037,636
74,597,495
-
8,585,215
-
-
93,622,851
74,597,495
2022
Cents
3.10
2.80
2021
Cents
(4.24)
(4.24)
The convertible debt has not been included in the 2021 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.
Annual Report 2022ZOO Digital Group plc
14. Property, plant and equipment
Group
Cost
Opening cost at 1 April 2020
Additions – Right of use assets
Additions - owned
Opening cost at 1 April 2021
Additions – Right of use assets
Additions - owned
On Vista acquisition
Disposals – Right of use assets
Closing cost at 31 March 2022
Accumulated depreciation
Opening balance at 1 April 2020
Depreciation
Opening balance at 1 April 2021
Depreciation
Impairment
On disposal
Closing balance at 31 March 2022
Opening carrying value at 1 April 2020
Opening carrying value at 1 April 2021
Closing carrying value at 31 March 2022
Production
equipment
Leasehold
property
improvements
Computer
hardware
Office
equipment,
fixtures &
fittings
$000
$000
$000
$000
661
-
182
843
-
94
-
-
937
523
105
628
149
-
-
777
138
215
160
4,284
154
22
4,460
8,495
2,110
-
(3,034)
12,031
1,293
1,013
2,306
1,097
611
(2,042)
1,972
2,991
2,154
10,059
3,180
-
2,045
5,225
-
2,001
97
-
7,323
2,714
582
3,296
1,126
-
-
4,422
466
1,929
2,901
150
-
41
191
-
172
-
-
363
112
15
127
39
-
-
166
38
64
197
77
Total
$000
8,275
154
2,290
10,719
8,495
4,377
97
(3,034)
20,654
4,642
1,715
6,357
2,411
611
(2,042)
7,337
3,633
4,362
13,317
Included in the net carrying amount of Leasehold Improvements are right-of-use assets of $7,959,000 (2021: $2,006,000)
The disposal of leasehold improvements relate to the right of use asset of the US office. This lease was re-negotiated and renewed
for 6 years.
Page
Company
Cost
Opening cost at 1 April 2020
Additions - owned
Opening cost at 1 April 2021
Additions – Right of use assets
Additions - owned
Closing cost at 31 March 2022
Accumulated depreciation
Opening balance at 1 April 2020
Depreciation
Opening balance at 1 April 2021
Depreciation
Closing balance at 31 March 2022
Opening carrying value at 1 April 2020
Opening carrying value at 1 April 2021
Closing carrying value at 31 March 2022
Leasehold
improvements
Computer &
Production
hardware
Office
equipment,
fixtures &
fittings
$000
$000
$000
615
6
621
2,704
1,593
4,918
309
174
483
850
1,333
306
138
3,585
414
235
649
-
589
1,238
209
136
345
237
582
205
304
656
76
-
76
-
102
178
71
3
74
9
83
5
2
95
Included in the net carrying amount of leasehold improvements are right-of-use assets of $2,041,000 (2021: $91,000)
15. Leases
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-current
Group
Company
2022
$000
1,313
7,830
9,143
2021
$000
1,506
1,759
3,265
2022
$000
94
2,527
2,621
Total
$000
1,105
241
1,346
2,704
2,284
6,334
589
313
902
1,096
1,998
516
444
4,336
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.
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:
accounts
Annual Report 2022ZOO Digital Group plc
79
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
variable
payments
linked to an
index
No of
leases with
termination
options
Right-of-use-asset
Office building
IT equipment
6
-
2-10 years
4.7 years
-
-
-
-
-
-
-
-
-
-
The lease liabilities are secured by the related underlying assets. Future minimum lease payments as at 31 March 2022 were as follows:
31 March 2022
Lease payments
Finance charges
Net present values
31 March 2021
Lease payments
Finance charges
Net present values
Within 1
year
$’000
1,868
(555)
1,313
1,733
(116)
1,617
1-2 years
2-3 years
3-4 years
4-5 years
$’000
1,760
(458)
1,302
1,580
(55)
1,525
$’000
1,665
(382)
1,283
563
(5)
558
$’000
1,637
(284)
1,353
45
-
45
$’000
1,600
(197)
1,403
-
-
-
After 5
years
$’000
2,732
(243)
2,489
Total
$’000
11,262
(2,119)
9,143
3,921
(176)
3,745
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. (2021: $12,000).
At 31 March 2022 the total commitment was $20,000. (2021: $26,000).
Total cash outflow for leases for the year ended 31 March 2022 was $1.9 million (2021 $1.6 million).
Group
Tangible assets for the Group includes the following amounts where the company is a lessee:
At 31 March 2022
Cost - capitalised leases
Accumulated depreciation
Net book value
At 31 March 2021
Cost - capitalised leases
Production
equipment
Leasehold
improvements
Computer
hardware
$000
298
(215)
83
$000
9,547
(1587)
7,959
$000
2,815
(2,377)
438
Production
equipment
Leasehold
improvements
Computer
hardware
$000
298
$000
4,086
$000
2,815
Office
equipment,
fixtures &
fittings
$000
26
(26)
-
Office
equipment,
fixtures &
fittings
$000
26
Total
$000
12,686
(4,205)
8,480
Total
$000
7,225
Page
Accumulated depreciation
Net book value
(159)
139
(2,080)
2,006
(2,066)
749
(26)
-
(4331)
2,894
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 2022
Cost - capitalised leases
Accumulated depreciation
Net book value
At 31 March 2021
Cost - capitalised leases
Accumulated depreciation
Net book value
Leasehold
Improvements
Computer
hardware
$000
3,229
(1,189)
2,041
$000
20
(20)
-
Leasehold
Improvements
Computer
hardware
$000
525
(434)
91
$000
20
(20)
-
Total
$000
3,249
(1,209)
2,041
Total
$000
545
(454)
91
The Group has relocated the head office premises in the year from Citygate, Sheffield to Castle House, Sheffield. The Group was
unsuccessful in actioning a break clause in the Citygate lease. Legal advice was sought to challenge the rejection by the landlord of
the Citygate building of our intention to break, but the conclusion was that we had no grounds. As a result the balance of the lease
has been impaired and charged to the statement of comprehensive income for the year to 31 March 2022. This amounts to $600,000
and the term left to run is four years.
The Group is actively engaged in looking for a tenant for the Citygate building and is following more than one line of enquiry.
Annual Report 2022ZOO Digital Group plc
16. Intangible assets
Group
Cost
Goodwill
$000
Development
costs
Patents and
trademarks
Computer
software
$000
$000
$000
Opening cost at 1 April 2020
Additions
Opening cost at 1 April 2021
Additions
On Vista acquisition
Closing cost at 31 March 2022
Accumulated amortisation
Opening balance at 1 April 2020
Amortisation
Opening balance at 1 April 2021
Amortisation
Closing balance at 31 March 2022
Opening carrying value at 1 April 2021
Closing carrying value at 31 March 2022
16,610
-
16,610
-
2,616
19,226
12,620
-
12,620
-
12,620
3,990
6,606
12,309
1,274
13,583
1,675
-
15,258
9,974
1,116
11,090
1,550
12,640
2,493
2,618
693
46
739
54
-
793
517
38
555
37
592
184
201
798
21
819
4
12
835
607
67
674
72
746
145
89
81
Total
$000
30,410
1,341
31,751
1,733
2,628
36,112
23,718
1,221
24,939
1,659
26,598
6,812
9,514
The Vista acquisition relates to two entities acquired by the Group in March 2022 (see note 17) The two subsidiaries are classified as
one CGU because they source customers together for media localisation services and are interdependent in their need for technical
media services. It is our intention to merge the two businesses in the next 12 months. The Board is satisfied that the Goodwill arising
on the acquisition is accurately recorded and requires no impairment after conducting a review of its future financial performance
under the ownership of ZOO and the substantial opportunity for growth in the Indian media localisation market. The two entities will
sit within the media production segment.
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 (2021: nil).
No intangible assets were impaired during the year (2021: nil).
Page
Company
Cost
Opening cost at 1 April 2021
Closing cost at 31 March 2022
Accumulated amortisation/ impairment
Opening balance at 1 April 2021
Amortisation
Closing balance at 31 March 2022
Opening carrying value at 1 April 2020
Opening carrying value at 1 April 2021
Closing carrying value at 31 March 2022
Goodwill
$000
10,960
10,960
8,679
-
8,679
2,281
2,281
2,281
Computer
software
$000
14
14
14
-
14
1
-
-
Total
$000
10,974
10,974
8,693
-
8,693
2,282
2,281
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 8% (2021: 10%). The carrying amount of goodwill is allocated as follows:
Software solutions
Media production
Vista India
Group
2022
$000
2,281
2021
$000
2,281
2022
$000
1,709
2021
$000
1,709
2022
$000
2,616
2021
$000
2022
$000
2021
$000
-
6,606
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.
Annual Report 2022ZOO Digital Group plc
83
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.
With the acquisition in March 2022 of the two Vista subsidiaries, they have been classified as one CGU and have been tested for
impairment under the same Discount and Growth rates as above. Management has based its forecasts from current products and
services and estimates of future clients requirements and market trends. A “cautious” assumption was used when assessing any potential
impairment.
If sector growth assumption rates were applied at 3% and a discount rate of 10% was applied, the Vista segment would require no
impairment.
If sector growth assumption rates were applied at 0% and a discount rate of 10% was applied, the Vista segment would require no
impairment.
If sector growth assumption rates were applied at 0% and a discount rate of 15% was applied, the Vista segment would require no
impairment.
17. Acquisitions
On 20 March 2022, the Group acquired 100% of two Indian registered companies, Vista India Digitek Private Limited and Vista
Tanweer Studios Private Limited, which are now subsidiaries of the group. We also acquired 35% of Vista India Digital Media Inc. a US
business, which is now an associate of the group. ZOO Digital Limited acquired a 1% holding of Vista India Digitek Private Limited in
the above transaction.
ZOO’s strategy is to become the leading provider of localisation services to the global entertainment industry through innovation and
superior customer service. The five pillars of this strategy are innovation, scale, affiliates, customer partnerships and talent.
As our key Hollywood customers grow internationally it is vital that we also become more global. This can be partly accommodated
by signing up more affiliates, however having local offices is becoming more of a priority.
The value to ZOO based on the original model presented to the Board is as follows
• Vista India Digital Media Inc. $3.0 million
• Vista India Digitek Private Limited $1.5 million
• Vista Tanweer Studios Private Limited $1.5 million
The total consideration for the transaction was $6 million (that being $3.1 million in cash, $1.9 million in deferred cash and the
remaining $1 million in shares in the Group) and the consideration was split across the three businesses in a non-commercial
arrangement to comply with Indian legal requirements.
The methodology for the split was that the two service businesses were worth 1 times their combined revenues and the balance
represents the negotiated price with the Vendors for the 35% of future profits of the US entity, its customer relationships, the ongoing
participation of the founders and the Indian brand value.
The Company is required to allocate the Vista India purchase price to tangible and identifiable intangible assets acquired and
liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill. The
Company has 12 months from the purchase date to determine the fair value amounts and hence the current amounts are provisional.
The following table summarises our initial allocation of the acquisition of Vista India Digitek Private Limited and Vista Tanweer Studio
Private Limited.
Non-current assets
Trade and other payables
Trade and other liabilities
Non current liabilities
Total net assets
Consideration – cash paid
Goodwill
Vista IDPL
Vista Tanweer
$000
26
1,126
(932)
(19)
201
1,500
1,299
$000
142
115
(74)
-
183
1,500
1,317
Total
$000
168
1,241
(1,006)
(19)
384
3,000
2,616
Page
18. Investments
Parent company – shares in group undertakings
Cost
At 1 April 2021
Additions (note 17)
At 31 March 2022
Amounts written off
At 1 April 2021 and 31 March 2022
Carrying amount
At 31 March 2022
At 31 March 2021
Investments in joint ventures and associates
Group
2022
2021
Joint ventures
Associates
Total Joint ventures
Associates
$000
-
906
-
-
906
$000
-
3,248
-
-
$000
-
4,154
-
-
3,248
4,154
$000
$000
-
-
-
-
-
-
-
-
-
-
2022
2021
Joint ventures
Associates
Total Joint ventures
Associates
$000
-
906
-
-
906
$000
-
3,146
-
-
$000
-
4,052
-
-
3,146
4,052
$000
$000
-
-
-
-
-
-
-
-
-
-
At 1 April 2021
Additions
Share of profits for the year
Dividends received
At 31 March 2022
Company
At 1 April 2021
Additions
Share of profits for the year
Dividends received
At 31 March 2022
$000
11,797
3,000
14,797
(2,097)
12,700
9,700
Total
$000
-
-
-
-
-
Total
$000
-
-
-
-
-
On 20 March 2022, the Group acquired 100% of two Indian registered companies, Vista India Digitek Private Limited and Vista
Tanweer Studios Private Limited, which are now subsidiaries of the Group. We also acquired 35% of Vista India Digital Media Inc. a US
business, which is now an associate of the Group.
On 20 October 2021, the Company invested £200,000 ($318,000) for new shares in Studyo Ares Filmcilik ve Yapimcilik Ticaret A.S
(“Ares Media”), a company incorporated in Turkey, which resulted in the Company obtaining a 20% equity stake in that Company. The
voting rights attaching to the stake will result in the investment being classified as a joint venture for accounting purposes.
On 28 February 2022, the Company invested $588,000 for new shares in Whatsub Pro Inc, a company incorporated in South Korea,
which resulted in the Company obtaining a 51% equity stake in that Company. The voting rights attaching to the stake will result in the
investment being classified as a joint venture for accounting purposes.
Annual Report 2022ZOO Digital Group plc
85
Name
Address of registered office
Class of share held
Proportion of nominal value held
Ares Media
Kireçburnu Mah. Arabayolu
Cad. No: 136 Sarıyer, Istanbul
B1, 78, Seongmisan-ro Mapo-gu
Ordinary Shares
Whatsub Pro
Seoul South Korea
Ordinary Shares
Vista India DM Inc
2600 West Olive Ave, Suite
500,Burbank. CA 915
Ordinary Shares
20%
51%
35%
The accounting date for Ares Media, Whatsub Pro and Vista India DM Inc is 31 December.
The investments are not considered material in the context of the Group as the consideration of any of the three investments
represents less than 5% of Group sales.
The share of profit for the year for all joint ventures and associates, all of which were acquired close to the year end, is trivial and
therefore has not been included in these “financial statements”.
The acquisition of Ares Media, Whatsub Pro and Vista India DM Inc have been made for strategic reasons and therefore the value
of the underlying assets and liabilities of these at acquisition and year end are immaterial. As a result, the investment value would
materially be associated with Goodwill.
19. Deferred income tax
Deferred tax assets comprise:
Vista India Digitek
Vista Tanweer
Fixed asset timing differences
Unused tax losses
As at 31 March 2022
The gross movement on the deferred income tax account is as follows:
At 31 March 2021
On Vista acquisition
Charged to the statement of comprehensive income
At 31 March 2022
Group
Company
2022
$000
2
43
(832)
2,633
1,846
Group
2022
$000
486
45
1,315
1,846
2021
$000
-
-
-
486
486
2021
$000
486
-
-
486
2022
$000
-
-
-
-
-
Company
2022
$000
-
-
-
-
2021
$000
-
-
-
-
-
2021
$000
-
-
-
-
Tax losses carried forward
The group has tax losses carried forward of approximately $38.1m (2021: $45.7m), of which $2.6m (2021: $3.4m) has been recognised at
a rate of 25% (UK) and 30% (US) 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. Any deferred tax assets on share based payments will
not be recognised due to the uncertainly of the ability to offset future profits.
Page
20. 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
Company
2022
$000
20,910
(29)
20,881
-
371
4,740
25,992
-
25,992
2021
$000
7,101
(29)
7,072
-
312
679
8,063
-
8,063
2022
$000
16
-
16
26,152
46
361
26,575
(26,095)
480
2021
$000
-
-
-
18,160
82
313
18,555
(18,100)
455
The fair values of trade and other receivables equal their carrying amounts.
The amounts owed by subsidiary undertakings are shown in as non-current assets because the Group is still in an investment phase
and does not expect or require its subsidiaries to repay its debts to the Group in the next 12 months.
As of 31 March 2022, trade receivables of ($283,000) (2021: $467,000) 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
2022
$000
354
(10)
(277)
(350)
(283)
2021
$000
553
149
(132)
(103)
467
There were no trade receivables outstanding in the company at 31 March 2022 that were overdue. (31 March 2021: nil)
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 (2021: $29,000) has been recorded accordingly.
Annual Report 2022ZOO Digital Group plc
The carrying amounts of trade and other receivables are denominated in the following currencies:
Group
Company
2022
$000
541
25,111
157
377
168
2,340
28,694
2021
$000
855
8,256
17
47
-
1,066
10,241
Pound sterling
US Dollar
Hong Kong dollar
Japanese Yen
UAE dirham
Euro
Allowance for impairment of trade receivables:
At 1 April 2021
Allowance for receivables impairment
Receivables written off in the year
At 31 March 2022
87
2021
$000
327
18,228
-
-
-
-
2022
$000
201
26,374
-
-
-
-
26,575
18,555
Group
2022
$000
29
-
-
29
2021
$000
11
18
-
29
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.
21. Note 21 – Not Used
22. Notes to the cash flow statement
22.1 Significant non-cash transactions
During the year the group acquired property, plant and equipment and computer software with a cost of $12,969,000 (2021:
$2,290,000) of which $8,495,000 (2021: $1,043,000) was acquired by the means of a lease.
22.2 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
Company
2022
$000
5,962
2021
$000
2,949
2022
$000
30
2021
$000
89
The fair values of the cash and cash equivalents are considered to be their book value.
Page
(948)
(1,479)
23. Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
Long-term
borrowings
Short-term
borrowings
Embedded
derivative
Lease
liability
1 April 2021
Cash-flows
- Repayment
- Proceeds
Non-cash
- Fair value
- Converted
- Additions
- Reclassification
31 March 2022
$000
4,110
(464)
-
-
(3,526)
(120)
-
$000
528
(67)
-
-
-
(461)
-
$000
4,452
$000
2,153
-
-
971
(5,423)
-
-
-
-
-
8,495
(557)
9,143
The financial instrument met the 10% change in future cash flows in the year and was there extinguished and re-recognised.
1 April 2020
Cash-flows
- Repayment
- Proceeds
Non-cash
- Fair value
- Converted
- Reclassification
31 March 2021
Long-term
borrowings
Short-term
borrowings
Embedded
derivative
Lease
liability
$000
3,960
(925)
717
358
-
-
4,110
$000
260
(58)
326
-
-
-
$000
978
-
-
3,474
-
-
528
4,452
$’000
2,808
(809)
-
-
-
154
2,153
Total
$000
11,243
-
971
(8,949)
8,495
(1,138)
9,143
Total
$000
8,006
(1,792)
1,043
3,832
-
154
11,243
Annual Report 2022ZOO Digital Group plc 24. Share capital and reserves for Group and Company
Called up share capital
Allotted, called-up and fully paid
88,335,079 (2021: 74,837,271) ordinary shares of 1p each
Reconciliation of the number of ordinary shares outstanding:
Opening balance
Shares issued
Vista Acquisition
Conversion of loan note
Fundraise
Share options exercised
Closing balance
89
2022
$000
1,174
2021
$000
1,010
74,837,271
74,547,271
28,022
636,100
5,336,459
7,454,727
42,500
88,335,079
-
-
-
-
290,000
74,837,271
Reserves
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Description and purpose
Share premium reserve
Represents the amount subscribed for share capital in excess of the nominal value.
Foreign exchange translation
reserve
Cumulative exchange differences resulting from translation of foreign operations into the
reporting currency.
Convertible loan note reserve
Represents the equity element of the converted loan note.
Share option reserve
Cumulative cost of share options issued to employees.
Capital redemption reserve
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.
Page
25. Borrowings
Non-current
Lease liabilities
Current
7.5% Unsecured convertible loan note stock
Amounts owed to subsidiary undertakings
Lease liabilities
Group
2022
$000
7,830
7,830
-
-
1,313
2021
$000
1,759
1,759
3,526
-
1,506
Company
2022
$000
2021
$000
2,527
2,527
-
9,701
94
-
-
3,526
9,701
2,196
Borrowings
1,313
5,032
9,795
13,343
Separable embedded derivative
Total borrowings
-
9,143
4,452
11,243
-
12,322
4,452
17,795
The group has recently signed with HSBC Bank US to provide an invoice financing facility of up to $5.0 million against US client
invoices raised by ZOO Digital Production LLC. The facility is in place until the renew date of 30 June 2023
The UK banking partner, HSBC, continues to provide an overdraft facility of £250,000. The principal outstanding at 31 March 2022
was nil (2021: nil). This line of funding has been secured as a floating charge over the assets of the UK companies and automatically
renews on an annual basis.
In September and November 2021, the 7.5% unsecured convertible loan stock was redeemed by the issue of 5,336,459 new ordinary
shares in ZOO Digital Group plc at a conversion price of 48p. This means that both convertible loan notes under CLN1, have been
redeemed in full and the Group is free of any outstanding liability and future interest payments.
Annual Report 2022ZOO Digital Group plc
Lease liabilities
Lease liabilities are payable as follows:
At 31 March 2022 Group only
Less than one year
Between one and five years
91
Future
minimum
lease
payments
$000
1,868
9,394
11,262
Present
value of
minimum
lease
payments
$000
1,313
7,830
9,143
Interest
$000
(555)
(1,564)
(2,119)
The lease periods range from between 1 and 10 years, with options to purchase the asset at the end of the term if applicable. Finance
lease liabilities are secured against the leased assets.
26. Trade and other payables
Group
Company
Restated
Current
Trade creditors
Amounts owed to subsidiary undertaking
Social security and other taxes
Deferred consideration
Accrued expenses
Non Current
Other payables
Deferred consideration
2022
$000
12,379
-
654
1,300
13,305
27,638
$000
19
600
619
2021
$000
3,809
-
399
-
5,747
9,955
$000
-
-
-
2022
$000
543
4,423
358
1,300
2,690
9,314
$000
-
600
600
The fair values of trade and other payables equal their carrying amounts.
27. 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
Group
2022
$000
3,647
(774)
2021
$000
372
3,477
300
-
1,509
5,658
$000
-
-
-
2021
$000
2,178
(813)
Page
Contract liabilities as at 31 March 2021
New contract liabilities
Revenue recognised in the year:
— That was included in the contract liability balance as at 31 March 2021
— Relating to new contract liabilities in the year
Contract liabilities as at 31 March 2022
Group
2022
$000
813
1,523
(543)
(1,019)
774
Of the existing contracts that were unsatisfied or partially unsatisfied at 31 March 2022, revenue is expected to be recognised in the
financial year to 31 March 2023.
28. Commitments for Group and Company
Capital commitments
The group had no capital commitments at the 31 March 2022.
Operating commitments
For FY21 & FY22 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.
29. Related parties
Subsidiaries
The parent company has investments in the following subsidiary undertakings:
Subsidiary undertakings
Country of
incorporation
Principal activity
Holding
ZOO Digital Limited
ZOO Digital Inc.
ZOO Digital Production LLC
ZOO Employee Share Trust
Limited
ZOO Digital Production
Limited
ZOOtech Limited
Vista India Digitek Private
Limited
Vista Tanweer Studios
Private Limited
UK
USA
USA
UK
UK
UK
India
India
%
100
100
Technology development
Sale & distribution technology products
2 ordinary shares
10,000 shares of
common stock
Media production
100 shares of common
stock
100*
Employee share scheme
2 ordinary shares
100
Dormant
Dormant
100 ordinary shares
100
95,714 ordinary shares
100
Media production
1333 ordinary shares
100
Media production
266,667 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
Key management personnel
The details of key management remuneration is disclosed in note 10.
Annual Report 2022ZOO Digital Group plc Related party transactions
Interest paid on loans:
Sara Green
93
Company
2022
$000
37
2021
$000
60
The gross interest payable to Sara Green at 31 March 2022 is nil (2021: $36,000).
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. This was converted to equity in the year to 31 March 2022.
In the 10 days since the acquisition of Vista India Digitek Private Limited and Vista Tanweer Studios Private Limited and 31 March
2022 there have been no related party transactions. The details of the acquisitions can be found in note 18. $70,000 was owed by the
Group at 31 March 2022 to Vista India Digitek Private Limited for localisation work.
30. 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:
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
2022
2021
Weighted
average
exercise price
$
0.58
1.76
0.36
-
0.96
0.49
Options
No.
2,855,145
1,305,000
(37,500)
(11,500)
4,111,145
2,134,249
Options
No.
2,240,318
1,119,827
(255,000)
(250,000)
2,855,145
1,827,818
The underlying weighted average exercise price for the shares under option at 31 March 2022 was 35p (2021:33p).
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
5,238,673
1,575,000
(5,000)
(43,000)
6,765,673
4,653,570
0.37
1.76
1.33
-
0.69
0.31
4,478,500
795,173
(35,000)
-
5,238,673
4,274,001
Weighted
average
exercise price
$
0.50
0.89
0.21
-
0.58
0.46
0.28
0.89
0.22
-
0.37
0.25
The underlying weighted average exercise price for the shares under option at 31 March 2022 was 19p (2021:18p).
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 10,876,818 outstanding options (2021: 8,093,818 options), 6,787,819 were exercisable (2021: 6,101,819).
Page Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Options
Expiry date
Exercise price
Exercise price
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 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
ZOO Digital Group plc Unapproved
Outstanding at the end of the year
No.
184,167
47,500
25,000
5,000
1,164,651
260,000
1,119,827
1,305,000
190,000
45,000
350,000
138,500
3,282,000
30,000
160,000
200,000
795,173
1,575,000
10,876,818
11 Jul 2022
26 Sep 2023
19 Jan 2025
17 Sep 2025
2 Aug 2027
2 July 2028
13 May 2030
25 Jan 2032
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
25 Jan 2032
$
0.23
0.24
0.23
0.23
0.20
1.33
0.89
1.76
0.23
0.24
0.23
0.23
0.20
0.49
1.33
0.80
0.89
1.76
£
0.1500
0.1500
0.1500
0.1500
0.1525
1.01
0.73
1.30
0.1500
0.1500
0.1500
0.1500
0.1525
0.3800
1.01
0.63
0.73
1.30
For the year ended 31 March 2022 the Group has obtained advice regarding the valuation of the stock options from Mazars Quantitive
Solutions (MQS).
The valuation of the stock options was based on MQS proprietary Python pricing library. All market data was sourced from external
provider (Bloomberg). The following features have been accounted for:
• Dilution factor due to issue of new stocks if stock options are exercised
• We ignore the vesting conditions and assume that 36% of the options will be exercised within two years from the end of the
vesting period and the rest of the options will be exercised on the expiration date.
In previous years, 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:
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Expected dividends
May 2020
83
0.55
5
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
2022
$000
513
2022
$000
2,619
2021
$000
710
2021
$000
2,085
Annual Report 2022ZOO Digital Group plc
95
31. 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 20)
Amounts owed by subsidiary undertakings (note 20)
Cash and cash equivalents
Total
Financial liabilities subsequently measured at
amortised cost
Lease liabilities (note 25)
Amounts owed to subsidiary undertakings (note 25)
7.5% Unsecured convertible loan stock (note 25)
Other
Trade and other payables excluding payroll taxes (note 26)
Total
Financial liabilities at fair value through profit or loss
(level 2)
Separable embedded derivative (note 25)
Total
Market Risk
Group
2022
$000
24,497
-
5,962
30,459
Group
2022
$000
9,143
-
-
-
27,758
36,901
Group
2022
$000
-
-
2021
$000
9,471
-
2,949
12,420
2021
$000
1,112
-
3,526
-
10,369
15,007
2021
$000
4,452
4,452
Company
2022
$000
16
26,152
30
26,198
Company
2022
$000
2,621
9,701
-
-
8,956
22,278
Company
2022
$000
-
-
2021
$000
-
18,160
89
18,249
2021
$000
44
9,701
3,526
-
8,581
21,852
2021
$000
4,452
4,452
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 2022 there was similar volatility in the
pound sterling/US dollar rate as in the previous year with the rate peaking at 0.767225 and falling to a low of 0.70385, with an average
rate of 0.7326. If the US dollar had remained at its highest level throughout the full year the group would have shown a post-tax profit
of $10.3m (2021: Profit $5.3m), if US dollar had been at its lowest level throughout the full year the group would have shown a post-
tax profit of $11m (2020: Profit 6.11m) and if the US dollar had remained at the average rate throughout the year the group would have
shown a post-tax profit of $10.7m (2020: $5.7m).
Transactions between the company and its subsidiaries are in US dollars, however the company is exposed to exchange rate
Page
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 2022 was 0.762 (2021: 0.726).
Interest rate risk
The group has a facility with HSBC Bank which provides invoice financing of up to $5m against US clients’ invoices raised by ZOO
Digital Production LLC. This facility is in place until 1 July 2023. Interest is payable on a monthly basis at an interest rate linked to
LIBOR. 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 a facility with HSBC Bank which provides invoice financing of up to $5m against US clients’ invoices raised by ZOO
Digital Production LLC. This facility is in place until 1 July 2023.
The group has a £250,000 overdraft facility in place from HSBC for the UK companies. There was no overdrawn balance at the year
end 31 March 2022.
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 2022
Borrowings
Lease liabilities
Trade and other payables
At 31 March 2021
Borrowings
Lease liabilities
Trade and other payables
Less than 1
year
Between 1 and
2 years
Between 2 and
5 years
Over 5 years
$000
-
1,313
28,412
$000
-
1,302
-
$000
-
4,039
-
$000
-
2,489
-
Less than 1
year
Between 1 and
2 years
Between 2 and
5 years
$000
3,526
528
10,768
$000
-
-
-
$000
-
504
-
Over 5 years
$000
-
-
-
Annual Report 2022ZOO Digital Group plc
Company
At 31 March 2022
Amount owed to subsidiary undertakings
Borrowings
Lease liabilities
Trade and other payables
At 31 March 2021
Amount owed to subsidiary undertakings
Borrowings
Lease liabilities
Trade and other payables
97
Less than 1 year
Between 1 and
2 years
Between 2 and
5 years
Over 5 years
$000
9,701
-
94
9,314
$000
-
-
204
-
$000
-
-
933
-
$000
-
-
1,390
-
Less than 1 year
Between 1 and
2 years
Between 2 and
5 years
Over 5 years
$000
9,701
3,526
44
8,881
$000
$000
$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.
32. 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
2022
$000
9,143
(5,962)
3,181
26,258
29,439
11%
7%
2021
$000
11,243
(2,949)
8,294
2,839
11,133
76%
66%
Page 33. Post Balance Sheets Events
On 1 July to Group signed a $5m funding facility with HSBC secured against the US client invoices. The facility is in place until 30 June
2023.
34. Correction of errors
During 2022, the Group identified a historic provision against intercompany balances which was no longer required as the
intercompany receivable had reduced in value since the provision was made. As a consequence, provisions for expected credit
losses have been overstated and the related intercompany balance understated. The errors have been corrected by restating each of
the affected financial line items for prior periods. The error impacts the company only financial statements as all related balances are
eliminated on consolidation in the current and prior periods.
The correction of this error increases the opening reserves at as 1 April 2020 by $2,907,000. In the year ended 31 March 2021, the loss
for the year is reduced by $316,000 and the intercompany payables decreased by $3,223,000.
There is no impact on the consolidated financial statements of the Group, or the basic or diluted earnings per share, or the total
operating, investing or financing cashflows of the Group for the years ended 31 March 2021 or 31 March 2020.
Annual Report 2022ZOO Digital Group plc 99
GROUP DIRECTORY
Head Office
ZOO Digital Group plc
ZOO Digital Limited
ZOO Digital Production LLC
Castle House
Angel Street
Sheffield
S3 8LN
United Kingdom
Castle House
Angel Street
Sheffield
S3 8LN
United Kingdom
T: +44 (0)114 241 3700
F: +44 (0)114 241 3701
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.
Castle House
Angel Street
Sheffield
S3 8LN
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
Page © ZOO Digital Group plc.
www.zoodigital.com