ZOO Digital Group plc Annual Report 2023

← All annual reports

FY2023 Annual Report · ZOO Digital Group plc

Loading PDF…

ZOO Digital Group plc
Annual Report 2023

Welcome to the annual report

ZOO's growth story

Managing global expansion: ZOO India

Bridging cultural gaps: ZOO Korea

Innovation and the ZOO Digital way

Market overview

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

Notes to the financial statements

113

Group directory

Key performance
indicators

Financial

Revenue:

$90.3 million

(FY22: $70.4 million)

Operating Profit:

$8.1 million

(FY22 restated: $1.9 million)

Adjusted EBITDA1 margin:

17.1%

(FY22 restated: 10%)

Operating expense as a
% of revenue:

29%

(FY22 restated: 27%)

Operational

Number of freelancers2:

11,467

(FY22: 11,028)

Retained sales3:

98.5%

(FY22: 97.6%)

1: Adjusted for share-based payments, the company’s preferred method of measuring profitability.

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 2023ZOO Digital Group plcPage 3

Broader Market Highlights
Substantial content budgets are not expected to diminish
in the medium-term

8.5%

$242bn

$1.6bn

Non-English digital
originals grew from
5.9% to 8.5% as a
percentage of the total
demand for streaming
original shows in the
period 2020 to 2022

Global content
investment totalled
$238 billion in 2022
and is forecast to reach
$242 billion in 2023

Media localisation
spend with major
suppliers estimated by
Nimdzi to have grown
by over 280% between
2018 and 2022, from $420
million to $1.6 billion

Outlook and Post Period event
Raised £12.5 million gross ($15.5 million) via an
oversubscribed placing in April 2023 to fund the proposed
acquisition of a partner company in Japan with which ZOO
continues to have positive, advanced discussions.

Current trading has been impacted by several major streaming companies
carrying out strategic reviews to refocus on profitability and the first simultaneous
strike of US writers and actors in 60 years. This has created short-term market
disruption and temporarily lower volumes of localisation and media services work.

The Board has been taking steps to adjust the cost base to reduce the impact
of the temporary industry slow-down on ZOO’s business while there remains
uncertainty around the timing of the resumption of former levels of production
and orders. The Group remains financially strong with net cash at 30 June 2023 of
$23 million.

ZOO expects to emerge in an even stronger position once certain customers have
rationalised their supplier bases, resulting in ZOO taking further market share once
former order levels resume. It is reasonable to expect this will be in H2 FY24.

The Board remains confident in ZOO’s medium and long-term fundamentals and
expects to deliver revenue growth over FY23 in the following years. Our guidance
for FY24 remains unchanged and 2030 strategy remains on track.

HIGHLIGHTS OF THE YEAR

Key Financials

28%

$15.5m

$7.9m

Revenue grew by 28%
to $90.3 million (FY22:
$70.4 million)
3% of sales were from newly
acquired operations

Adjusted EBITDA* grew
to $15.5 million (FY22
restated: $7.1 million)
EBITDA* margin increased to
17.1% (FY22 restated: 10.0%)

Reported profit before
tax of $7.9 million
(FY22 loss restated:
$0.2 million)

$15.5m

Net cash generated
from operations up 197%
to $15.5 million (FY22:
$6.0 million)

$11.8m

Net cash at year-end
of $11.8 million
(FY22: $5.2 million)

* Adjusted for share-based payments

Annual Report 2023ZOO Digital Group plcPage 5
Page 5

Operational Highlights
ZOO selected as a key vendor by a second major
content producer with ZOOstudio adopted to
support its content localisation across vendors

$56.6m

Media localisation segment sales grew by 34% to $56.6 million
(FY22: $42.2 million) – subtitling increased by 15% and dubbing by 73%

98.5%

Leading standard of customer satisfaction maintained – retained sales
KPI was 98.5% (FY22: 97.6%)

$32.1m

Media services grew by 22% to $32.1 million (FY22: $26.4 million)

11,467

Worldwide freelancer network grew by 4% to 11,467 (FY22: 11,028)

Strong progress in global
growth initiative with
further investments across
hubs in India, South Korea,
Denmark and Spain

ZOO Digital Group plc
Annual Report 2023

MAKING LIFE
EASIER FOR THE
PEOPLE WHO
ENTERTAIN THE
WORLD.

Page 7

WELCOME TO
THE ANNUAL REPORT

I am delighted to present our annual report, showcasing
another year of significant progress and profitable growth
for ZOO Digital. With a 28% increase in revenues to
$90.3 million and improved margins, we have demonstrated
the effectiveness of our business model and its inherent
operating leverage.

Against a challenging economic backdrop and amidst the
dynamic world of streaming, we have successfully expanded our
international operations and further cemented our position in
the media localisation industry. This highlights the strength and
resilience of ZOO’s offerings, which continue to resonate with
the biggest names in entertainment.

By investing strategically in international hubs and expanding
our capabilities, we have attracted new business and talent,
enhancing our competitive edge. Looking ahead, we remain
committed to driving media globalisation innovation, leveraging
cutting-edge technologies, and delivering exceptional service to
our clients. With a steadfast focus on being the industry’s most
trusted globalisation service provider, ZOO Digital is primed
for strong growth by making life easier for the people who
entertain the world.

Gillian Wilmot CBE
Chairman
ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 20

ZOO'S GROWTH STORY

As a tech-enabled provider of services to the media and
entertainment market ZOO is positioned to deliver superior growth
in its sector due to its capital- and human-efficient model. Over
the past seven years the Company has delivered compound annual
growth rate (CAGR) of over 34%, with revenues increasing from
under $12 million in 2016 to over $90 million in 2023.

At a Capital Markets event in October 2022 the Company set out its vision for
growing revenues to $400 million by the end of the decade. By estimating the
annual spend on media localisation by nine of the largest international producers
and distributors of entertainment content, ZOO estimates that its addressable
market in 2022 was around $1.5 billion, which implies a market share of 6%.

Revenue $ million

$90

$71

$40

$30

$12

2016

2020

2021

2022

2023

Annual Report 2023ZOO Digital Group plcPage 9

Addressable Market ($million)

FY2030

FY2022

3,000

2,500

2,000

1,500

1,000

500

Studio A

Studio B

Studio C

Studio D

Studio E

Studio F

Studio G

Studio H

Studio I

FY2022

FY2030

The Company believes that the total industry spend on media localisation will grow
over the decade due to several factors, including trends in content production,
entry of new global streaming services, delivery of content into more languages
and concentration of industry spend on large media companies. The Company
estimates that its addressable market will almost double over the period to 2030.

ZOO Revenue Progression ($million)

400

350

300

250

200

150

100

Year 1

Year 2

Long-term

Media services

Localisation

Over this same period, due to its
strengthening relationships with the
major buyers of these services, the
Company believes that it is realistic
to grow its market share to at least
14% as a result of delivering growth
rates for media services of at least
10%, subtitling at least 15% and
dubbing at least 45%. This would
equate to an overall revenue growth
rate of 24% which is achievable
given the CAGR delivered over the
past seven years of over 34%.

ZOO Digital Group plc
ZOO Digital Group plc
Annual Report 2023
Annual Report 2023

MANAGING
GLOBAL EXPANSION

with Managing Director, India, Rajiv Raghunathan

ZOO Digital's acquisition of Vista India has been a successful move, expanding its services
and capitalising on India's growing market. With India's OTT (over the top) revenue
predicted to reach $4.5 billion and SVOD subscribers doubling by 2026, ZOO's South
Asia expansion was well-timed. The seamless integration of Vista India into ZOO Digital
Group ensures uninterrupted high-quality services for clients, empowering the India hub
to leverage ZOO's advanced technologies and handle large volumes of subtitling and
dubbing projects across languages, connecting Indian and international content with a
broader audience.

In this interview, Rajiv Raghunathan, Managing Director, India for ZOO Digital, looks back
on the significant growth of the team, positive client response, and the adoption of ZOO
Digital's technology ecosystem. Looking ahead, Rajiv sees the democratisation of content
bringing even greater opportunity to continue the globalisation of the media industry.

Can you introduce yourself and tell me
about your role at ZOO Digital?

How would you recap on the last year as
part of ZOO?

I’m Rajiv Raghunathan, Managing Director,
India for ZOO Digital. I’ve been in the media
and entertainment business for over three
decades, having started my career as a
computer graphic artist before transitioning
into advertising filmmaking and post
production. I subsequently moved into digital
distribution, and then tech-related content
delivery services for premium OTT platforms.
With this diverse background, I feel very
fortunate to have a holistic view of the media
business and wider entertainment landscape.

Since the acquisition, my primary goal has
been to grow the local business opportunity –
and scale our teams to manage larger volumes
for our clients.

To that end, our team size has doubled in
the last year, with the team expanding from
around 60 people to over 120 in that time.
This headcount has added a lot of resource
across multiple departments and specialisms,
and significantly enhanced our capabilities
and capacity. We have also been able to
support ZOO’s global service offering and

give our international clients 24-7 visibility on
their projects; we’re in a key strategic position
to manage deliveries that are timebound or
support projects that need additional care
and effort.

Our team has been recognised as a Netflix
Preferred Fulfillment Partner and is the only
Amazon Prime delivery house for their original
shows commissioned in India. As part of ZOO,
we have been able to build on this status
and continue to reach new heights with our
established relationships.

How have the other territories of ZOO
benefited from the resources of our
dedicated India hub?

As well as the growth we’ve achieved in India,
we have also been able to support territories
where ZOO already has such an established
presence – across the US, UK, Turkey, Dubai
and so on. From project management to
subtitling to audio mixing, we collaborate on
multiple projects and help our team members
across the globe to deliver large scale
international projects seamlessly.

With our India office working in multiple
shifts, we can give our global team complete
visibility and updates on their projects, across
multiple time zones.

Were there any unexpected challenges
that arose during the expansion process?
How were these challenges dealt with?

Our primary challenges revolved around
increasing the size of our team and
operations. When you scale up within a
short period of time, the whole process is
very organic and we therefore had to adapt
quickly.

By growing from a team of around 60 to 120
within a year, we needed to look at a suitable
working environment that would align with
the future of the company. The ideal scenario
was to find a space that could accommodate
the team and its ambitious growth plans
from day one. Being flexible, versatile and
ambitious about what we were looking to
achieve were all crucial in achieving this.
We are now in a strong position and a great

Page 11
Page 11

deal of the credit goes to our team, who are
very excited to have joined the ZOO family.
Everyone is willing to go the extra mile to see
results, and we are committed to providing
the right support to our staff during this time
of change. We’re all looking forward to more
exciting times at ZOO!

How have our clients responded to the
expanded services offered in these new
territories?

Very positively. The proof is in the increasing
volume of work that we have managed in the
last year. We have substantially increased
our revenue and this can be attributed to
the confidence we have given our clients to
manage large volumes in a timely manner.

We are continuously demonstrating to our
clients that we can not only do great work,
but also handle much larger volumes of
content for a wider customer base. Our
clients were always very pleased with our
quality of service and now our ability to
manage greater volume solves a lot of their
pain points. We are well placed to be the
ideal end-to-end service provider for all their
OTT delivery requirements.

ZOO Digital Group plc
Annual Report 20

What kind of new talent have we been able
to tap into because of the expansion?

The size of our team has grown significantly
over the last 12 months and a large factor in
this is the reputation and global reach that
ZOO Digital provides. As part of the ZOO
family, with offices all around the world, we
offer something even greater.

We are recruiting more senior professionals
from other companies in the industry, who are
seeking out positions in our teams due to our
role within this larger entity.

Our network of freelance talent also
continues to grow exponentially. A major
factor behind this is the wider demand, due
to the growth in home and international
markets – as studios localise content to
expand its reach.

How has the ZOO technology ecosystem
been adopted within our India hub?

Due to the previous relationship between
ZOO Digital and Vista India, we were already
familiar with ZOO’s broad technological
infrastructure. Since the acquisition, these
systems have become more integral to our
workflows across all projects.

We have completely removed or replaced
previous tools with more advanced
technologies developed by ZOO. This full
suite of platforms covers the management of
projects, talent resource, payments and many
other areas; allowing us to fully integrate with
their technology ecosystem.

ZOO’s platforms have also created new
service opportunities. Specifically, the
ZOOdubs platform has opened doors for
remote and hybrid dubbing, allowing us
to reach the very best local talent across
different territories – enabling them to
record in a way that works for them while
safeguarding quality and security throughout.

These platforms developed by ZOO offer
flexibility, efficiency and transparency across

a wide range of areas, so we are delighted
to have integrated them with our existing
workflows and processes. We are even more
confident in managing larger volumes of work
because of the backing of this dedicated
technology.

In your opinion, what are the biggest trends
shaping the media globalisation industry
currently?

One trend that is really apparent is the
democratisation of localisation, with services
demanded outside of premium-tier content.
12 to 16 months ago, you would only tend to
see top-tier, premium content localised into a
large array of languages, but that has evolved
with audience demand. Different types of
content are now being localised and brought
to new markets; even free-to-air content is
being subtitled or dubbed into a growing
number of languages.

Audiences expect this democratisation and
it’s becoming the norm in many markets.
An example of this is the Indian Premier
League (IPL), where live cricket matches are
simulcast into multiple languages, which was
something unheard of until last year. This is

Annual Report 2023ZOO Digital Group plcindicative of changing audience demands and
expectations and we believe is a sign of things
to come.

Taking this one step further, we are also
seeing content creators on video sharing
platforms increase their global reach; there
are YouTube and Instagram content creators
maximising their global reach with the help of
subtitles and dubs in multiple languages.

If one wishes to monetise their content, it
needs to be of a certain quality and provide
a great viewer experience. And to maximise
global reach, that content needs to be
localised. This proliferation of localised
content is something we hadn’t anticipated
would happen quite so fast. In terms of
volume, I can’t even put a number on this,
it’s only going to get bigger in the coming
years. And we believe it’s going to be a global
phenomenon!

Generally speaking, while there has been
some slowdown in content creation spend,
there appears to be greater numbers in terms
of the sheer business of media globalisation,

Page 13

unlocking new revenue streams for content
creators through localisation and media
services. These are tell-tale signs that
localisation is here to stay and grow.

Looking ahead, what are your plans for
further expansion in the coming years?

A key aim is to make sure we can cater to all
territories in our country. India makes over
2,000 films a year, with a large film industry
in Mumbai and down south in Chennai,
Hyderabad and parts of Kerala.

As a natural progression, we are building a
brand-new facility in Chennai. The production
facility is spread across 11,000 square feet,
with over 10 dubbing rooms, multiple Atmos
rooms, mixing rooms and multiple screening
rooms.

This development will put us in an even
stronger position to manage higher volumes
of content, that need to be subtitled and
dubbed for South Indian languages. The client
need for this is ever-growing, so with the help
of Mumbai (which will manage languages
outside of Southern India) this combination
gives us a tremendous edge in the market,
with owned-and-operated facilities
completely independent of external studios
and outsourcing.

What lessons have you learned from this
expansion that could apply to future
expansion efforts?

One lesson we have learned is to be more
optimistic when it comes to the OTT
services business. We need to be extremely
bold! If you have a talented team and great
infrastructure the opportunity in this space is
limitless. The growth rate and market appetite
has been incredible. Therefore, we are always
challenged with managing larger volumes of
business that need to be executed in shorter
timelines. This is fantastic for a company like
ZOO, and certainly a good problem to have.

ZOO Digital Group plc
Annual Report 2023

BRIDGING CULTURAL GAPS:
THE ART OF LOCALISING
KOREAN CONTENT FOR
INTERNATIONAL AUDIENCES

with Managing Director, Korea, Jonghyun Oh

In this interview with Jonghyun Oh, Managing Director of ZOO Digital in Korea,
we explore the rapid rise of the Korean content market and its global success.

Jonghyun provides insights into the role of cultural authenticity in the localisation of
Korean media and highlights key considerations when adapting content for international
audiences. Addressing common misconceptions and stereotypes, he shares how ZOO
Digital ensures an accurate portrayal of Korean culture. Additionally, we delve into ZOO
Digital's approach to handling the high volume of content while maintaining quality and
meeting tight deadlines. Looking to the future, Jonghyun discusses anticipated trends in
Korean media localisation and their impact on the industry as a whole.

Join us as we dive into the dynamic world of Korean media localisation with Jonghyun
Oh, Managing Director of ZOO Digital in Korea, and gain valuable insights into the
industry's rapid growth, cultural authenticity, quality assurance, and future trends.

Can you provide an overview of the
Korean content market and its rapid rise to
worldwide success in recent years?

creating a wealth of K-pop related content,
including a series featuring boy band “BTS”
and drama productions like "Big Bet".

The acclaimed movie "Parasite" underscored
the global success of Korean content.
However, K-dramas have long dominated the
Asian market. With the phenomenal success
of series such as "Squid Game", "The Glory",
and "Crash Landing on You", Netflix has
recently committed to investing
$2.5 billion into Korean content over the
next four years. Similarly, with the K-pop
industry rapidly expanding, Disney is

This surge in interest and investment
in Korean content extends beyond just
streaming platforms. Major production
studios and networks are recognising the
immense appeal and market potential
of Korean entertainment. For instance,
renowned director Bong Joon-ho, the
mastermind behind "Parasite," has paved
the way for more collaborations and cross-
cultural projects. This has led to exciting

Annual Report 2023ZOO Digital Group plcpartnerships between Korean filmmakers and
Hollywood studios, resulting in the creation of
captivating films that blend the best of both
worlds.

capture the tone, idioms, and cultural
references embedded in the original Korean
dialogue, striving for an equivalent impact in
the target language.

Page 15

Additionally, the influence of K-dramas and
K-pop has transcended borders, inspiring
international adaptations, and collaborations
with artists from different backgrounds. The
global success and recognition of Korean
content have sparked a creative renaissance,
with industry players eagerly exploring the
vast storytelling possibilities and cultural
richness that Korean entertainment brings
to the table. As a result, we can anticipate
a continued surge in innovative and diverse
Korean content that will captivate audiences
worldwide.

How do you assess the role of cultural
authenticity in the localisation of Korean
media? What are some key considerations
when localising Korean content for
international audiences?

In Korea, unlike most of the world, we
present our names with the family name
preceding the given name. This perhaps
reflects our culture, where family and the
collective are prioritized over the individual.
At work, we traditionally address colleagues
by their last name and title, such as "Manager
Oh", rather than a casual first-name basis like
"Hey, Jonghyun". Previously, we would have
translated these names in a Western format,
such as "Jonghyun Oh", but now we maintain
the Korean format – "Oh Jonghyun" – to
authentically portray our culture. This trend
extends to other aspects of our culture, like
food. Instead of referring to our dishes with
English equivalents, like 'Kimchi spicy soup',
we now use the traditional name, 'Kimchi
jjigae'.

These are just two examples, but this
cultural authenticity plays a crucial role in
the localisation of Korean media as it helps
maintain the integrity and unique identity of
the content. Korean language structure and
expressions have distinct characteristics
that contribute to the cultural nuances of
the content. Translators must accurately

Understanding social and hierarchical
dynamics is also essential. Korean society
places importance on respect, age, and
seniority. Translators should consider
maintaining appropriate levels of formality
and addressing individuals by their proper
titles or honorifics, reflecting the hierarchical
relationships depicted in the content.

Thirdly, when considering multilingual
audio description, visual elements play a
significant role. Traditional Korean aesthetics,
symbolism, and art forms can carry cultural
significance. Paying attention to details such
as costumes, set designs, and props can
contribute to an authentic portrayal of Korean
culture, enhancing the audience's immersion
and understanding.

Lastly, cultural references and context
should be carefully adapted. Korean history,
traditions, festivals, and local customs may
need contextual explanation or adaptation to
ensure international viewers can fully grasp
the intended meaning and appreciate the
cultural nuances being portrayed.

By understanding and incorporating these
key considerations, the localisation of
Korean content can effectively convey the
nuances, values, and cultural richness that
make Korean culture unique, fostering a
deeper appreciation and connection with
international audiences.

What are some common misconceptions
or stereotypes that you encounter when
localising Korean media? How do you
address these issues and ensure an accurate
portrayal of Korean culture?

There can be misinterpretations or
misunderstandings of Korean traditional
customs, etiquette, and beliefs. For instance,
the importance of age hierarchy in our social
interactions may not be easily grasped
or could be misconstrued. That's why we
rely on seasoned translators who are not

only bilingual but also have an intimate
understanding of the cultural nuances of both
societies. Localisation is more than mere
translation; it's about adapting the content to
make it culturally appropriate and meaningful
to the target audience.

By addressing common misconceptions,
conducting thorough research,
collaborating with cultural experts, and
maintaining cultural sensitivity, localisation
professionals can ensure an accurate
portrayal of Korean culture, fostering cross-
cultural understanding and appreciation
among international audiences.

The popularity of Korean dramas, music,
and entertainment has led to a surge in
demand for localisation services. How do
you handle the high volume of content
while maintaining quality and meeting tight
deadlines?

Securing a competent team of linguists is
our initial step in handling the high volume of
content while maintaining quality and meeting
tight deadlines. However, it's not just about
assembling a team; maintaining consistency
in quality, terminology, and formality across
multiple episodes is crucial. To achieve this,
we implement a systematic approach that
encompasses both human expertise and
technological tools.

One of the key strategies we employ is
selecting a proficient and experienced
Quality Controller (QCer) to lead the project.
The QCer plays a pivotal role in ensuring
consistency throughout the entire series.
They meticulously review and compare
translations, cross-referencing terminology
and style guidelines to maintain a cohesive
voice and accurate portrayal of the
content. Their expertise helps address any
discrepancies or inconsistencies, ensuring a
high level of quality across all episodes.

In addition to the human element, we
leverage technology to enhance our
efficiency and maintain consistency. Our
ZOOsubs system integrates a glossary feature

that serves as a centralised repository of
approved terms and phrases. This glossary
not only helps linguists access and adhere
to consistent terminology but also speeds
up the translation process by providing
ready-made translations for frequently used
terms. By combining human expertise with
technology, we streamline the localisation
workflow, reduce errors, and maintain a
high level of quality within tight deadlines.

Moreover, we understand the importance of
effective communication and collaboration
throughout the localisation process. Clear
and concise communication with the client,
project managers, linguists, and QCers is
crucial for maintaining project timelines
and ensuring everyone is aligned with the
quality standards and expectations. Regular
meetings, feedback loops, and proactive
problem-solving approaches enable us
to address any challenges promptly and
efficiently, keeping the project on track and
meeting the demanding deadlines.

By combining a competent team,
experienced QCers, technological tools,
effective communication, and streamlined
processes, we can handle the high volume
of content while upholding quality
standards and meeting tight deadlines. Our
commitment to excellence in localisation
allows us to deliver culturally authentic
and high-quality Korean entertainment
experiences to a global audience, satisfying
the surge in demand for localisation
services in this rapidly growing industry.

How do you measure the success of a
localisation project? What metrics or
indicators do you use to evaluate the
effectiveness of our localisation services?

In addition to adhering to industry-standard
metrics, we strive to go beyond expectations
in terms of quality and timely delivery. Our
commitment to excellence is reflected in our
remarkably low redelivery rates, which serve
as a testament to the meticulous attention to
detail and rigorous quality control processes
we employ throughout the localisation

Annual Report 2023ZOO Digital Group plcPage 17

The increasing global fanbase for Korean
dramas, music, and entertainment will
drive a surge in demand for localisation
services. This trend will require localisation
providers to expand their resources and
capabilities to meet the growing needs
of international audiences. In addition,
collaborations and partnerships between
Korean content creators and global
streaming platforms will likely intensify,
leading to more extensive distribution
of Korean content on a global scale.

The impact of this growth in Korean content
popularity on the localisation industry will
be significant. Localisation companies will
need to enhance their cultural expertise to
accurately convey the nuances and cultural
references present in Korean content.
Moreover, there will be a need for efficient
and streamlined localisation processes to
handle the high volume of content while
ensuring quality and meeting tight deadlines.
Technology will continue to play a crucial role,
with advancements in subtitling and dubbing
technologies facilitating faster and more
accurate localisation.

Overall, the increasing popularity of Korean
content will drive the expansion and evolution
of the Korean media localisation industry,
opening up new opportunities and challenges
for localisation providers as they strive to
deliver authentic and engaging localised
experiences to global audiences.

workflow. By maintaining stringent quality
standards, we ensure that the localised
content meets the highest levels of accuracy,
linguistic proficiency, and cultural authenticity.

On-time delivery is another crucial
aspect of our service. We understand the
importance of meeting tight deadlines
and the impact any delays can have on the
overall distribution and release plans of our
clients. Our dedicated project management
team diligently oversees every stage of the
localisation process, implementing efficient
workflows, coordinating resources, and
closely monitoring project timelines. Through
effective communication and proactive
planning, we consistently achieve on-time
delivery, providing our clients with peace of
mind and ensuring the seamless integration
of their localised Korean media into their
distribution platforms.

By excelling in these industry-standard
metrics, we demonstrate our unwavering
commitment to delivering exceptional
quality and service. Our consistent track
record of meeting and surpassing these
benchmarks showcases our dedication to
client satisfaction and solidifies our position
as a trusted partner in the localisation of
Korean media.

For the end-users, the hallmark of excellent
translation is when the audience doesn't
even realise they're reading subtitles or
hearing a dubbed version. The localisation
should seamlessly blend into the content,
delivering the narrative in the most
natural way possible. When we receive
no feedback from the audience, we see
that as a sign of successful localisation.

As the Korean content market continues
to expand globally, what future trends do
you anticipate in the field of Korean media
localisation? How do you think these trends
will impact the industry as a whole?

As Korean content gains popularity
worldwide, the future of Korean media
localisation is poised for remarkable growth.

ZOO Digital Group plc
ZOO Digital Group plc
Annual Report 2023
Annual Report 20

INNOVATION AND
‘THE ZOO DIGITAL WAY’

with CTO, Chris Oakley

As ZOO CTO, Chris Oakley is responsible for leading technology initiatives at ZOO
Digital Labs, the dedicated research and development arm of ZOO Digital. This team
of tech innovators investigate new and cutting-edge technologies to aid the media
globalisation industry and service the biggest names in entertainment.

In this interview, Chris highlights the importance of bringing fresh technology to
traditional ways of working and reflects on the past 12 months of rapid growth. He
discusses tech trends and talks about the biggest challenges that ZOO solves for clients
in today’s media landscape. For Chris, the never-sit-still approach to technology is
exactly what ZOO Digital does best.

In your words, can you describe your role
within ZOO Digital?

Specifically with ZOO Digital Labs in mind,
how do you lead these initiatives?

My role is about leading technology initiatives
within the company, this can be split into
three main areas.

Initially, it’s about leading our dedicated
R&D arm, ZOO Digital Labs, where we are
responsible for developing our cloud-based
platforms and new technological innovations.
But my role is also to look at how we can
innovate in all areas of the business and
improve how we work collectively, including
the technology that we are adopting in other
areas of the business.

Finally, I’m focused on the technology side
of our global expansion into new locations
around the world – and how we continue
to make our technology scalable and
successfully implemented across all facilities
in all territories.

The goal of ZOO Digital Labs, as our research
and development arm, is really to understand
the current tech landscape within media
globalisation and how we can differentiate
and improve upon that. Understanding the
cutting-edge technologies that are coming
through, and the key trends we’re seeing,
but also looking at how we can differentiate
on this and how we can bring about new
advancements.

Part of that comes from what we’ve always
done; looking at how things are done
traditionally and then taking a fresh look at
it with modern technology – how can we
change things for the better and improve
on these ways of working? Whether that’s
reducing the amount of time involved in
certain processes or improving quality

through new tools and features. It’s about
using the technology available to us
today to change things for the better.

That’s really where our research initiatives are
right now; looking at how tech can be used to
aid what we’re doing.

How would you reflect on the last 12 months
at ZOO from a technology and innovation
perspective?

It’s been an exciting and pretty breath-taking
12 months in terms of what we have achieved
and continue to achieve.

Industry-wise, there’s a lot of talk around new
technology and how this can be adopted
by the media and entertainment industry
and what the future could look like there. So,
naturally, we’ve spent a lot of time looking
into those particular areas and doing a lot of
investigation and research.

Then, looking inwards at ZOO, there’s been
a rapid growth period for us in those 12
months, with lots of new territories coming
on board; so new offices, new people,
new opportunities. Practically speaking,
getting everyone integrated and working as
a collective unit, and establishing ‘the ZOO
way’ has been a particular challenge but also a
point of pride.

Looking back, it’s a massive positive, as we
have demonstrated how our scalability is
backed by technological innovation. This has
enabled us to bring on these new locations
and people while integrating everybody into
the same way of working.

It’s been a real success story in building that
‘chase the sun’ workflow, working globally
rather than in different localities
and territories.

How do we emulate ‘the ZOO way’ across
various new territory launches?

The key to the ZOO way is knowing that we
aren’t limited to the same mould of how the
industry has operated historically.

Instead of looking at legacy ways of working,
that are often entirely reliant on old-fashioned

Page 19
Page 19

brick-and-mortar facilities, studios and
recording methods, we instead apply a fresh
pair of eyes and look at localisation with
the technology available today. The ZOO
way focuses on how we can do these things
differently; how can it be more efficient,
faster or offer greater transparency than
through more traditional vendors. This is the
approach we’ve taken and it’s what defines us
– building global hubs that are backed with the
technology to bring everything together.

This philosophy has always allowed us to be
more agile and flexible. We’re not a lumbering
beast which can potentially hold these
advancements back. Instead, we’re able to go
in with a fresh perspective and do what works
best, rather than how it’s always been done –
and this is the approach we’re taking around
the world.

What are the biggest challenges we’re
solving for our clients through technology?

I think the biggest challenge facing our clients
is the insatiable audience demand for more
and more content and that obviously includes
more content globally. For us, it’s all about how
we can help deliver that with the resource
available around the world.

This is where technology really supports the
industry, by working outside of traditional
restraints, we can reach new talents and
translators, and therefore unlock new capacity

ZOO Digital Group plc
Annual Report 20

and resource for our clients. With greater
capacity, comes a scaling up of content
localisation – and therefore more content
delivered to audiences around the world.

On the other hand, our solution is also in
working more efficiently. We’ve got lots of
very experienced artists and freelancers
that are heavily in demand but it’s about how
we can get more out of those people, and
how can we set them up to work in the most
efficient ways possible and minimise any
errors or delays, for example. With greater
workflow efficiencies and quality control,
we can streamline and speed up working
practices and help bring content to market
faster.

This is where we can expand the talent net,
but also do more with the same, or fewer,
people. I think that’s really where technology
and automation, and newer technologies
such as artificial intelligence (AI) and machine
learning (ML), can really help everyone to
achieve more. That’s where we are leading the
charge, in developing and adopting the best
technologies to achieve greater results for our
clients.

What are the biggest technology trends
facing the media globalisation industry?

AI and ML are definitely the biggest trends
and talking points right now. In our industry,
people are looking at this with some
trepidation, which is understandable. But it’s
necessary that we look at how this is going to
be adopted into media globalisation and how
we can best utilise these tools for our clients,
while making sure everybody in the industry is
happy with the results.

As with a lot of industries right now, AI and ML
are either having an impact already, or causing
questions to be asked for the future. For ZOO,
we see these as complementary technologies;
here to support and enhance current ways of
working. That’s the direction that we’re moving
towards. In terms of wider industry trends,
many of our clients are managing the global
rollouts of dedicated streaming platforms,

and this includes handling global workflows,
teams and vendors. This is predominant in the
industry right now and means a huge amount
of content needs to be localised, prepared
and published worldwide in as smooth and
transparent a way as possible.

It’s obviously a major challenge for these
entertainment studios to get this scale of
content out there, but there’s also new areas
bringing interesting new challenges alongside
this – the likes of FAST channels that are
becoming more and more popular. For the
entertainment industry, the common theme is
looking at how content owners can monetise
their assets across all these platforms and
strategies, and provide entertainment to end
users in a way that works for them.

It’s our role in all this to provide solutions
that work now and for the future, so we
need to work alongside the biggest names in
entertainment and adapt to changes in the
industry together.

Can you explain what ZOOstudio is, and how
it is helping our clients?

Working closely with the biggest names in
entertainment for so long put us in a unique
position to understand the challenges they
face. With this, we identified the need for a
centralised digital repository for studios to
identify where their projects are and how
everything is progressing; the costs, the
milestones and so on, in one central place.
That’s where ZOOstudio comes in. It offers
this central management of media and
localisation services.

One of the key differentiators here stems from
our clients working with numerous different
vendors across various globalisation projects.
What ZOOstudio offers is a ‘vendor-agnostic’
approach, allowing information from all our
clients’ vendors to be made available.

By hooking into all the vendor systems and
pulling that information into one central place,
this allows studios to know exactly what’s
happening and keep track of costs, project
milestones and other centralised information.

Annual Report 2023ZOO Digital Group plcPage 21

With each project and piece of content, there
is so much that needs to be created and
managed globally, and with such high-pressure
timescales, there needs to be a transparent
way of understanding where everything is, and
that’s what ZOOstudio offers.

Then when we identify areas where a new
tool or system update could improve things,
this can be easily adapted and implemented
because it lives within our technology
ecosystem. That means we’re more flexible
for our customers.

How do we make sure to stay at the
forefront of industry innovation?

ZOO Digital Labs lives and breathes this.
Fundamentally, it comes from really investing
in the R&D side of the business. We have
research project teams that work on cutting-
edge technologies, while also partnering with
a lot of universities and investing in research
projects to constantly keep ahead of what’s
happening in the industry.

We’re always looking at how we can adopt or
create the best technologies going forward
and that runs across the whole gamut of what
we’re doing – all areas of the business. It’s
not just the products themselves, but also
how we project manage our services, how
we work around different facilities and how
everybody integrates with our systems. Having
all our products interconnected and working
together is key, as is looking at new updates to
make sure that everybody continues to do the
job to its best possibility.

Essentially, we want to provide the very
best results, so the ZOO way of working is
looking at how we best utilise technology to
accomplish our goals while developing with
the wider world of entertainment.

How does the ZOO technology ecosystem
safeguard ‘the ZOO way’?

When you make heavy investments in
brick-and-mortar studios using traditional
platforms and traditional hardware, it can tie
you down. By making these huge investments
upfront, that doesn’t always allow you to be
flexible. And that’s where our approach is
different. Our technology ecosystem is built
to be constantly evolving and staying at the
cutting edge.

With this living, breathing ecosystem of
interconnected technology platforms, we
have a more lightweight, future-proofed
approach. That’s our philosophy, to make sure
that we’re not restricted to the traditional
ways of doing things, with heavily embedded
legacy workflows and systems.

Instead, we have the flexibility and movement
to change should we need to. As this industry
is constantly moving the goalposts and
integrating new innovations, it’s crucial that
we tackle new challenges and new ways of
working to stay ahead of the wider industry.
When industry changes happen, we have to
be there with solutions up our sleeves.

What’s next for ZOO Digital Labs?

The team is working on a lot of projects that
we need to keep under wraps, but as ever,
we’re hoping to live up to our reputation as an
industry innovator and disrupter.

This means developing our products to solve
new challenges for our clients and looking
at how we can utilise new technology to
streamline some of our working practices –
and wider industry practices.

Internally, we’re looking at how we can
improve the efficiency of the services we
offer while allowing us to scale in a way that is
timely, efficient and secure.

We’re also continuing to evolve our product
set so the likes of ZOOdubs, ZOOsubs and
ZOOstudio are all in continuous development
and receive new features and improvements
all the time. This is a constantly evolving,
never-sit-still approach to development – and
it’s what we do best.

ZOO Digital Group plc
Annual Report 2023

MARKET OVERVIEW

The media and entertainment industry has witnessed significant
developments and ongoing trends that continue to reshape the globalisation
landscape. Despite short-term disruptions, the market backdrop presents
significant long-term opportunities for ZOO.

The Changing Dynamics of TV
Entertainment:

Consumer Preference for
On-Demand Services:

In 2022, the hours spent by US adults
watching digital video exceeded traditional
TV for the first time – and this trend is
projected to continue.

The flexibility of streaming services is
leading to increased consumer churn,
prompting content providers to revise
their content strategies.

US Hours Spent per day with TV
US Hours Spent per day with
vs. Digital Video Among Adults
TV vs. Digital Video Among Adults1

03:33

03:27

03:16

02:51

03:07

03:02

03:18

03:11

02:55

02:46

02:33

01:57

2019

2020

2021

2022

2023

2024

Digital video
Digital video

Premium SVOD Quarterly
Subscription Growth

Premium SVOD Quarterly Subscription
Growth2

)
s
e
s
s
o
L
(

s
n
o
i
t
i
d
d
A

r
e
b
i
r
c
s
b
u
S

-10

-20

-30

-40

Q 3'19

Q 4'19

Q1'20

Q 2'20

Q 3'20

Q 4'20

Q1'21

Q 2-21

Q 3'21

Q 4'21

Q1'22

Q 2'22

Q 3'22

Gross Additions

Net Additions

Cancels

Gross Additions

Net Additions

Cancels

Source: eMarketer, February 2023

Source: Antenna, November 2022

Annual Report 2023ZOO Digital Group plc

Page 23

Investment in Content Production:

Industry spend on content has been growing year-on-year, with streaming
companies now placing greater emphasis on profitability.

Global content spend ($B)3
Global content spend ($B)

)
B
$
(

d
n
e
p
s

t
n
e
t
n
o
c

a
b
o
G

260

240

220

200

180

160

140

120

100

)

(
h
t
w
o
r
g
Y
o
Y

-2

-4

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Global content spend ($B)
Global content spend ($B)

YoY growth (%)
YoY growth (%)

Source: Ampere analysis, January 2023

New Monetisation Models:

Global Streaming Services:

Streamers are evolving their commercial
propositions and introducing advertising-
funded services as well as launching Free
Ad-supported Streaming Television (FAST).

FAST Channel Revenue by Region $B

FAST Channel Revenue by Region $B3

Worldwide, streaming is concentrated on a
small number of global services.

Global SVOD Market Shares December
Global SVOD Market Shares December 2022
20221

Other

Netflix

2019

2020

2021

2022

2023

2024

2025

2026

2027

Disney+

Apple TV+

Max

Prime Video

Canada
US

Canada

Europe
Europe

Latin America

RoW

Source: Omdia, January 2023

Source: JustWatch, February 2023

CHAIRMAN’S STATEMENT

I am pleased to report another year of significant progress and profitable growth as the business scaled its international operations
and continued to take share of the media localisation market. This has been achieved against a challenging economic backdrop and a
dynamic marketplace as the behemoths of the streaming market compete for market share globally, demonstrating the strength and
resilience of ZOO’s offering to customers.
The Company increased revenues by 28% to $90.3 million and grew operating profit more than four-fold to $8.1 million with improved
margins, compared to a restated operating profit in FY22 of $1.9 million. The growth without the restatement, which was due to a
misstatement of cost of sales relating to work-in-progress at the year-end, was 120%. We have benefitted from the in-built operating
leverage in our model which is now starting to come through, together with increasing cash generation. Year-end cash stood at
$11.8 million, up from $6.0 million in FY22, and was over $23 million at the end of June 2023 following a successful $15.5 million equity
placing.
At ZOO’s Capital Markets Day in October 2022, we outlined our longer-term aspiration to reach $400 million of revenue by 2030. This
is predicated on taking a greater share of a growing market. The Board estimates that ZOO’s addressable market may double from
$1.5 billion currently to $3 billion by the end of the decade, based on the industry’s investment in original content and international
expansion by major US media companies. Given our global, end-to-end offering and embedded operations with several of these media
companies, we believe ZOO is well positioned to increase market share from 6% currently to our target of approximately 14% by the end
of the decade.
These assumptions are underpinned by the strength of our services. ZOO is one of only five companies in the world with the capability
and scale to operate as a primary end-to-end vendor to major media groups. Importantly, our ZOOstudio platform is now embedded in
the operations of two major media companies following our selection in February 2023 as a key supplier to support another high-profile
streaming provider with its global roll-out.
For the major US media companies that are seeking to deliver their streaming services globally, competition remains intense. The recent
relative slowdown in subscriber growth from established markets has led to an increased focus on profitability and return on investment
from content spend. The Board believes that ZOO can benefit from this trend as media companies outsource greater volumes of work to
a smaller number of trusted vendors. Furthermore, localisation is proven to be one of the most cost-efficient ways to increase viewership
while scaling streaming services to reach new international audiences.
To capture this demand, the Company has continued to invest in establishing hubs in key international locations. These investments have
significantly increased our capacity across India and South Korea as well as Turkey, Scandinavia and most recently Spain, helping us to win
new business and attract talent.
In May 2023, the Company successfully completed an oversubscribed placing of £12.5 million ($15.5 million) for the proposed acquisition
of a trusted partner in Japan, another strategic growth market for content and localisation budgets. The fundraise included investment
from existing and new shareholders, as well as giving existing retail investors the opportunity to participate, with several new institutional
investors joining the register. I would like to thank all our shareholders for their ongoing support in accelerating our growth ambitions.
ZOO is proudly a future-facing business. The first course from ZOO Academy – developed in partnership with the University of Sheffield
last June – has already started to deliver the next generation of talent in the highly specialised field of script adaptation for dubbing. Our
teams are also constantly innovating and drawing on the latest technologies to improve processes, such as AI, which we plan to apply to
complement traditional practices and creative talent.
We have welcomed many new team members over the last year, particularly across our international hubs. I would like to express my
sincere gratitude to all my colleagues for the passion they show in delivering for clients and building a better business for everyone.
Our mission remains to be the entertainment industry’s most trusted globalisation service provider. We have made good progress over
the last year and remain well positioned to capture future demand. Despite some customers currently reviewing their content strategies
in the short term, and industrial action in the US temporarily disrupting new content production, the structural drivers for international,
multilingual content remain firmly in ZOO’s favour. Our leading position in the localisation market ensures the business is well positioned
to deliver strong growth over the medium-term.

Gillian Wilmot, CBE
Chairman

Annual Report 2023ZOO Digital Group plcSTRATEGIC REPORT

Page 25

Introduction
The year ended 31 March 2023 covered a period during which ZOO continued to grow strongly, underpinned by structural market drivers
despite challenging macroeconomic conditions that have created operational challenges for several customers. As the competitive
landscape for consumer streaming services intensifies, the industry is committing enormous sums of capital to produce original content
which has been increasing year-on-year, and with it the demand for premium localisation and media services has grown across many
languages. The Board believes that ZOO’s innovative strategy and its approach to global growth provide strong differentiators and
competitive advantage that will lead to an increasing market share over time. Progress during the period under review includes important
milestones on that journey.

Market Overview
The period included some significant developments within the industry and a continuation of several important trends that are reshaping
the media and entertainment landscape. Despite the current short-term disruption, the Board is confident that the market backdrop
presents significant opportunities for ZOO over the long term.

The changing dynamics of TV entertainment
Prior to the emergence of on-demand services, the business of TV was straightforward for distributors and consumers alike. The TV set
in the living room was the hub of consumption, to which cable and satellite operators served their audiences by broadcasting content
across terrestrial channels.

Watching video content today is a very different experience now that Over-the-Top services (“OTT”) – the delivery of programming over
the internet – and Video-on-Demand (“VOD”) enable individuals to watch content of their choosing at a time and on a device that is
convenient to them. The expectations of consumers today have led to a much more complex economic environment for the production
and global delivery of content.

The launch of Netflix in 2007 marked the beginning of this new era. Except for 2020, traditional TV has declined every year since 2013,
although it was as recently as 2022 that the hours spent by US adults watching digital video exceeded traditional TV for the first time.
This trend is projected to continue, and with it the decline in revenues generated by media companies from both the carriage fees they
charge distributors and their share of advertising income.

Some media and entertainment companies are not yet delivering returns from streaming sufficient to offset the declines in traditional
TV. Streaming represents the future of home entertainment, yet many media companies are still optimising their commercialisation of
content to enhance the return on investments made in its production.

Consumer preference for on-demand services
The shift from traditional TV to streaming has been good for consumers. In developed markets expensive bundles of channels have been
replaced by low cost, on-demand packages. With most subscription VOD (“SVOD”) services charged monthly in advance, the flexibility
of these offerings has led to a higher level of consumer churn, with content providers developing strategies to minimise it, partly through
careful selection of the content they supply.

Audience growth in emerging markets such as India and China has made APAC a high priority region for all global streaming services. This
is further underpinned by the rapid increase in smartphone adoption, which is substantially increasing the addressable market. Selection
of content is a crucial factor that will determine the success of streaming services in emerging markets. For example, in India, services
have found success by focusing on original content across genres, targeting niche audiences, and catering to the country’s multiple
languages. Local content has been shown to be particularly important in growing and retaining local audiences, and as a result global
streaming providers are sourcing content from many countries.

Investment in content production
The industry’s annual spend on producing original programming has been growing year-on-year, although there are signs that this is
slowing. In a March 2023 research report, Moffett Nathanson forecasted that total media-industry content cash spend will grow just 1%
to $136.4 billion in 2023, with global content investment in the same year forecast by research firm Ampere Analysis to be $242 billion.
Moffett Nathanson expects Disney to continue to be the leader with $26.4 billion in 2023, followed by NBCUniversal ($22.5 billion),
Warner Bros Discovery ($18.4 billion), Paramount ($15.9 billion), Netflix ($15.2 billion), Amazon ($8.5 billion) and Apple ($6.1 billion).

2022 was the year in which most media companies reassessed their strategies for streaming subscriber growth and after two years of
strong double-digit content budget expansion, total spend in 2023 is expected to grow by just 2% as more companies shift their focus
away from solely increasing subscriber numbers to delivering profitability.

Several major media companies that operate streaming platforms have revisited their content investment plans in 2023 in the face of

greater competition and the higher levels of consumer churn mentioned previously. Some organisations have indicated that they do not
plan to increase content spend above current levels, while others have signalled that they will trim their content budgets in 2023. The
investment in content by genre is changing also; according to an April 2023 research report by K7 Media, the production of unscripted
titles, which are in general much less expensive to produce than scripted programmes, increased in 2022 compared with other genres
and there was an increased number of unscripted format launches across both local and global platforms.

It is unclear whether the wider market will see a shift to lower budget titles or a retracement in the number of hours of entertainment
content produced annually, but it seems possible that global levels of spend on content production have plateaued for the time being.

Streaming profitability
In the face of declining revenues from linear TV, several leading players have announced plans to reduce operating costs to restore
profitability. In May 2023, Disney announced that a cost-cutting strategy involving budgetary and labour reductions is on track to “meet
or exceed” its $5.5 billion savings target. Warner Bros. Discovery announced plans in late 2022 to find more than $3 billion in cost savings.
According to the Wall Street Journal, Netflix, which operates a profitable service, has developed plans to reduce 2023 spending by
$300 million through layoffs, real estate reductions, and rationalisation of cloud computing resources. Paramount Global announced in
May 2023 its intention to lay off 25% of staff in its domestic cable networks.

Platform consolidation
The fierce competition amongst streaming services is leading to early stages of consolidation of some platforms. In April 2023 Warner
Bros. Discovery announced a new streaming service called ‘Max’ which merged the HBO Max service with Discovery+, combining the
content provided by these two offerings. In May 2023 Disney announced plans to combine content from its Disney+ and Hulu services in
the US. These efforts help to provide subscribers with a broader offering and greater appeal, which highlights the diversity and range of
fresh content across a wide range of genres that will be required for success.

Alternative monetisation models – AVOD and FAST
The commercial propositions of streamers continue to evolve, both through refinements in pricing by country and in their approach
to monetisation. For example, in 2022 both Disney and Netflix introduced advertising-supported tiers allowing subscribers to access
content at a lower price.

Consumers in the US are adopting Advertising Video on Demand (“AVOD”) at a faster rate than their non-ad-based counterparts, a recent
report has found. According to Comscore, AVOD services are seeing adoption at a faster rate than SVOD, with a 29% increase in US
households streaming AVODs in 2022 compared to 2020 compared with a 21% increase during the same period for SVODs.

Having become well-established in the US over the past two years, Free Ad-supported Streaming Television (“FAST”) – a category of
OTT services for delivering subscription-free digital channels that stream advertising supported content via Connected TV devices – is
now becoming popular around the world. On FAST channels, content plays according to a pre-set schedule with advertising breaks and
simulates the linear viewing experience of traditional television. “[FAST] is the fastest growing segment of the viewing economy,” said Evan
Shapiro, a veteran television executive. “There are people who think it’s basically going to eclipse cable before too long.”

FAST channels provide another avenue for producers to monetise content, particularly catalogue titles, as well as delivering incremental
income through a revenue-share arrangement. In January 2023, Warner Bros. Discovery announced deals with streaming services Roku
and Tubi to license 2,000 hours of movies and TV series for the launch of Warner Bros. branded FAST channels. The deal marks an
evolution of Warner Bros. Discovery’s approach to streaming, which once reserved the studio’s movies and series for its own subscription
services. Now, the studio has begun selling movies and TV shows to third parties. Similarly, Amazon announced in May 2023 that it will
distribute its original films and TV shows to media outlets outside its Prime Video service for the first time. A February 2023 report by
Bloomberg claimed that Disney is exploring the possibility of licensing film and TV properties to rival media outlets, shifting from Disney’s
current streaming strategy of keeping its films and TV shows exclusive to the Disney+ service.

Other providers have been operating FAST channels for some time, for example, Paramount Global operates its own FAST service,
PlutoTV, launched in 2014, which already has an international footprint that spans 25 countries throughout the US, Europe, and Latin
America. Amazon has operated a free-to-view ad-supported streaming service Freevee since 2019, currently available in the US, UK, and
Germany.

Global streaming services
There are only a small number of services that have truly global reach, namely Amazon Prime Video (200 countries), Netflix
(190 countries), Apple TV+ (over 100 countries) and Disney+ (60 countries). Three other major US media companies have created their
own direct-to-consumer platforms that were initially available in North America only, namely NBC Universal with its Peacock service,
Paramount Global with Paramount+ and Warner Bros. Discovery’s Max. All three organisations are now in the process of establishing
international distribution of their original content, in some cases by launching their own service in multiple countries, in others through
partnerships with local operators.

International Content
Streaming services have been investing heavily in global content production and licensing of third-party programmes as English-speaking
audiences have grown more interested in foreign content. As a percentage of the total demand for streaming original shows in the period
2020 to 2022, non-English digital originals grew from 5.9% to 8.5%, according to Parrot Analytics’ data. An objective here is to create hit
shows that are successful around the world following the success of titles such as Money Heist (Spain), Squid Game (South Korea) and
Dark (Germany).

In March 2023 Netflix shared data that revealed the rising popularity of non-English language content on its platform. In the UK, viewing
of non-English language programmes on Netflix increased by 90% over the previous three years. In 2022, more than 70% of global Netflix
viewing came from members watching a title from a country other than their own.

Over the last few years, the makeup of demand for foreign content in the US has been in transition. Content in European languages

Annual Report 2023ZOO Digital Group plcPage 27

including Spanish, German and French has been growing in popularity for some time, but in the past two years demand for Asian titles
has soared. In the period from 2020 to 2022, the consumption of Netflix shows in Japanese, Korean, Chinese, and Hindi grew from 35.4%
to 59.8%, with Japanese programming becoming the most in-demand foreign language in the US in the last quarter of 2021. Of particular
significance here is Anime, a leading genre of Japanese content.

Korean-language programming is set to become the second most in-demand foreign language for streaming originals in 2023. The
demand for Korean shows is largely driven by the popularity of K-pop, which has exploded in recent years, especially among younger
audiences. This has helped to drive interest in other forms of Korean media, largely benefiting Korean dramas. The demand for Korean
content more than doubled during 2021 after the release of Squid Game. More than 70% of the audience for Japanese shows and 60% of
the audience for Korean titles is made up of people under 30.

Industrial action in the US
Since early May 2023, 11,500 screenwriters have been on strike against Hollywood studios and entertainment companies for the first
time in 15 years in a battle for higher pay and better working conditions. This is the culmination of a dispute between the Writers Guild
of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP), a trade association that represents over 350
American television and film production companies.

As a result of the wholesale shift of the industry away from TV and towards streaming, the WGA has warned that the future of the
profession is at stake. When producing for streaming platforms, in general fewer episodes of each show are ordered, there are fewer
writers working on each project and streaming service operators typically limit the residual payments that have traditionally been made
to compensate writers for the reuse of their credited work. The writers are also campaigning for restrictions on the use of artificial
intelligence.

While initially it was just the short turn productions, such as late-night shows, that were affected by the strike, it’s now the case that most
productions in Los Angeles have been disrupted by picketing writers. This situation has been considerably worsened by a strike by US
actors which commenced in July 2023, marking the first time in 60 years that both writers and actors have simultaneously taken industrial
action. This more recent strike, organised by the Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA),
is likely to have far-reaching reverberations across the industry while actors seek higher pay and safeguards against unauthorised use of
their images and voices through artificial intelligence. It has brought all US production of new content to a halt and, while all sides in the
dispute are motivated to reach a resolution quickly, it is currently unclear how long this will take.

Impact of market developments on ZOO
The market developments described above are expected to provide enhanced opportunities for ZOO to continue to grow and win
market share in the medium term.

1. Resilient content spend

Despite cost-cutting by some major media companies, the expectation is that the already substantial content budgets will not
diminish in the medium term, supported by competition between streaming services and structural demand for new content. ZOO’s
proposition is closely aligned with new content production, and this implies that, once the short term hiatus is over, its addressable
market will remain strong.

Increasing reliance on trusted vendors

The cost cutting at several significant media companies will result in smaller internal staff to process similar volumes of content,
necessitating greater reliance on vendors such as ZOO that offer a comprehensive end-to-end (E2E) service. We envisage a
continuation of the trend of large buyers working with a fewer number of global service providers, since this simplifies the internal
operations required to manage these relationships.

3. Demand from new streaming models

The launch of advertising-supported and free-to-view streaming services provides a greater number of channels through which
content is delivered to consumers. The need to maximise the size of the audiences for these services highlights the importance of
localisation, which is the most cost-effective way of expanding viewership. The Board estimates that major media companies today
spend as little as 1% to 3% of content budgets on localisation.

4. Localisation unlocks ROI and profitability

To maximise the return on investment in content, producers and distributors are increasingly looking for titles and genres that are
attractive internationally, irrespective of the source language, and this too highlights the importance of and need for localisation to
and from many languages, performed to a standard that is consistent with that of the original programmes.

5. Concentrating outsourcing on end-to-end vendors

For major US media companies, the streaming era has brought a change in the practices of adapting content for international
audiences, with this being increasingly overseen by the company itself through a central function rather than by many third parties
in territory. This has resulted in the buying of multi-lingual services becoming more concentrated on a smaller number of vendors,
particularly those with an E2E capability such as ZOO, that can fulfil this remit in-house.

The prolonging of the Hollywood industrial action is now affecting the pipeline of titles that require localisation and media services
to prepare them for global streaming distribution. Whilst negotiations are making slow progress, it is reasonable to expect that a
compromise will be reached, and normal operations will resume. In the meantime, streaming companies may refocus their short-term
content acquisition plans to other countries that are unaffected by the Hollywood strikes, and/or on migrating more titles from their
expansive back catalogues as was their practice during the period of the pandemic.

Media Localisation Market Size
Localisation market research firm Nimdzi provides an annual index of the top 100 vendors of localisation services across all verticals.
Combining the revenues of specialist media localisation providers in the top 100 positions indicates that revenues for the segment grew
by over 280% in the period 2018 to 2022, from $420 million to $1.6 billion. Across all verticals ZOO ranks 28 in the 2023 report, up from 35

in 2022 and 44 in 2021; in the media localisation vertical ZOO ranks 6 in 2023.

In its annual Language Industry Market Report published in May 2023, market commentator Slator estimated the media localisation
vertical at $2.97 billion, up 11% in 2022 over the prior year. The Board continues to hold the view that ZOO’s addressable market,
corresponding to the proportion spent by major global media organisations, is around half of this figure.

Strategy
As a provider of premium media services and localisation, ZOO is one of only five companies in the world with the capability and scale to
operate as a primary E2E vendor to major media and entertainment companies. ZOO’s differentiation is the result of a strategy consisting
of five pillars: innovation, scalability, collaboration, customer focus and talent.

Innovation
ZOO’s leading services are delivered using its proprietary technology. Developed by a team of over 70 in-house specialists, the software
provides efficient and scalable solutions for the delivery of premium localisation and media services.

During the period under review the team has prioritised the further development and enhancement of ZOOstudio – its globalisation
management platform designed to be used by ZOO’s customers. These new developments extend the capability of the platform in
many areas, including finance reporting, order history analysis and data entry automation. Such functionality can result in the platform
becoming embedded more broadly and deeply within customer operations thereby enhancing the strategic value that ZOO delivers and
its competitive differentiation.

Amazon Web Services (AWS) has been for some time one of the Company’s strategic partners to support the cost-efficient deployment
of its cloud-based software services. During the period ZOO joined the AWS Partner Network, having successfully completed the
foundational technical review of its ZOOdubs dubbing services platform. This network is a global community of AWS partners that
leverages programmes, expertise, and resources to build, market and sell customer offerings, with membership indicating the observance
of best practices to reduce risks around security, reliability, and operational excellence. ZOO’s membership of the AWS Partner Network
provides customers with a further proof point of the calibre of its technology.

Scalability
ZOO’s cloud-based platforms form the foundation of the scalability in capacity that the Company can offer to its customers. These
platforms enable an expansive ecosystem of partners that, in combination, provide the creative resources needed to fulfil localisation
and media services at scale across many languages. Two of the key components of this ecosystem are firstly, the extensive pool of
freelancers across multiple disciplines, and secondly, a small number of hubs in key strategic locations.

The freelancer pool consists predominantly of individuals that provide specialised linguistic skills, each delivering localisation of
entertainment content into their mother tongue. This includes translators of subtitles, adapters of scripts for dubbing, voice actors and
dubbing directors, each of whom receives and performs work through an intuitive web browser interface. The Company performed a
rigorous review of its freelancer database during the period and removed those individuals who, for various reasons, are no longer eligible
for work. This resulted in a small net increase in the available number of freelancers to 11,467 (up 4%).

ZOO’s global growth initiative – the strategy of establishing hubs in key locations – is designed to ensure the company is positioned well
to deliver its services across global languages with high availability. The period just completed marks the first full year of the integration
of ZOO India following the acquisition of Vista India Mumbai in March 2022. This has provided the Company with a capability both for
subtitling and dubbing into several leading languages spoken in the country, and for the processing of a range of media services. The
facility positions ZOO very well to operate as a partner for customers that are targeting India as a market for streaming services as well as
a source of original content that is attractive in other markets.

Following the success of its investment in 51% of a Seoul-based partner in March 2022, the Company announced in April 2023 the
acquisition of the remaining shares in ZOO Korea. The venture has helped to address the growing global demand for Korean content
and distribution of non-Korean titles in the country with premium and secure provision of dubbing, subtitling, quality control and media
services. The Board estimates that $4.5 million of incremental revenues were recognised across the Company in FY23 because of
ZOO Korea and that it will generate significant incremental revenue in future years through its own operations in South Korea as well as
services it provides to assist ZOO in the US and UK.

In April 2022 the Company launched ZOO Denmark, based in Copenhagen, to act as its Nordic hub. Content from Scandinavian countries
continues to see critical and commercial success around the world, with the region building a reputation for high-quality content
with global appeal. Post the period end, the Company launched an Iberian hub through a strategic investment in established dubbing
and localisation company, AM Group. The investment brings new facilities in Madrid and Valencia and offers increased capacity and
expertise in Spain and Portugal, both of which are territories that hold high strategic importance for ZOO’s major studio clients.

Collaboration
Its partnerships with third parties enable ZOO to deliver capability and capacity in a cost-effective way.

The Company is helping to address the shortage of talent in the industry in certain disciplines and languages through various initiatives
delivered through ZOO Academy. These include a partnership programme with universities and other educational establishments where
ZOO is making its proprietary cloud platforms available for teaching purposes to support the education of translators, script adapters
and aspiring dubbing professionals. In the period, 17 new institutions partnered with ZOO, bringing the total number to 32 across Europe,
Asia, and the Americas, with a strong pipeline of further candidates currently in discussion. Students who complete the courses offered
by these organisations will be trained in the use of ZOO’s platforms, which assists the Company’s talent recruitment efforts.

In a separate ZOO Academy initiative, the Company is co-developing with academic and industry experts a series of online courses and
training programmes to equip learners with the knowledge and practical experience to participate in work for our industry. The first such
course, developed in partnership with University of Sheffield and covering the discipline of adapting scripts for dubbing, was launched in
June 2022 and has since delivered new talent in this important and highly specialised field.

Annual Report 2023ZOO Digital Group plcPage 29

The Company has for some time partnered in many countries with traditional dubbing studios and businesses where the management
teams are progressive and willing to embrace ZOO’s cloud-based platforms and methodologies. In addition to their help with access
to talent, this approach provides the Company with the opportunity to work closely with partners to inform investment and acquisition
decisions. Both ZOO India and ZOO Korea were former partners that have become wholly owned subsidiaries, now fully integrated into
the Group.

Customer focus
ZOO’s aim is to operate as a primary vendor to the largest buyers of localisation and media services in the entertainment industry. Target
companies are predominantly US based organisations that produce original content and distribute to global audiences through streaming
services and other channels.

A key strategy employed by the Company to strengthen its relationship with customers is through its ZOOstudio platform. This
provides, amongst other features and benefits, a means for customers to manage the complex business of planning, procuring, and
tracking services placed with multiple providers. ZOOstudio was adopted by a major global streaming service in 2019 and was selected
subsequently by another media company. During the period under review, a further major streaming service adopted ZOOstudio ahead
of its global rollout. This represents another success story for ZOO as a strategic technology partner. While longer-term contractual
arrangements are still being finalised, a significant number of revenue-generating projects for this client are already underway, and work
volumes are expected to increase materially during FY24. Despite the industry headwinds, the Company is in ongoing dialogue with
other key players regarding the use of ZOOstudio and the platform forms a key part of tenders for framework agreements with key
global strategic target customers. This ongoing dialogue and interest further underpins our belief that localisation is a key focus for global
streaming companies and despite the short term disruptions localisation remains a key priority for the industry.

Talent
While ZOO’s platforms enable the Company to deliver services in an efficient and scalable way, there remains a requirement for talent,
particularly to support the production of premium subtitling and dubbing. The Board has sought to expand internal resources to enable
the business to process higher volumes of work required by customers.

The acquired facility in Mumbai has provided an effective base from which to expand capacity not only for fulfilment of Indian language
production but also for the cost-effective processing of a range of media services. Since the acquisition, headcount in India has
increased over the period by 85% to 120, and plans are at an advanced stage to establish a second facility in Chennai which will become
a hub from which to deliver services for the different languages spoken in southern India.

As part of the investment in AM Group in May 2023, we have welcomed to the ZOO family Víctor Martínez, Managing Director of AM
Group, and his team of media localisation specialists. The team will support the scaling up of capacity and capability in Castilian and
other dialects of Spanish as well as European Portuguese.

Review of Operations
The Group manages on an internal basis the following KPIs which assist in measuring progress against the Group’s strategy.

Financial

•

Revenue increased 28% to $90.3 million (FY22: $70.4 million)

• Adjusted EBITDA1 margin up to 17.1% (FY22 restated: 10.0%)

• OPEX as a % of revenue 28.7% (FY22: 27.2%)

• Operating Profit margin 9.0% (FY22 restated: 2.7%)

Revenue is considered a KPI as it is the headline demonstration of services provided to customers, and of confidence of customers to
utilise our services. Operating profit is considered a KPI as this is a key measure of how value is added to the group’s net assets, whilst the
EBITDA1 margin is a KPI (and also an Alternative Performance Measure) and considered a key metric as this closely approximates to the
cash generated from operations, considered to be a key indicator of the general health of the group.

Operational

• Number of freelancers2 11,467 (FY22: 11,028)

•

Retained Sales3 98.5% (FY22: 97.6%)

The operational KPIs have been adopted by the business because they give indicative measures of quality and capacity which are both
important to our customers.

1. Adjusted for share-based payments (as explained in note 11 to the financial statements).
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.

The financial KPIs indicate excellent progress towards the long-term aspiration that the Board outlined at a Capital Markets event in
October 2022 to generate revenues of $400 million by 2030. Revenue increased year-on-year by 28%, of which 25% was organic (after
excluding continuing sales transacted through ZOO India), this being more than the compound annual growth rate required to achieve
the stated long-term aspiration. EBITDA margin, adjusted for share-based payments, showed an improvement over FY22 at 17.1%, up by
7.1 points. Operational expenditure expressed as a percentage of revenue increased to 28.7% from 27.2% in the prior year, as the Board
committed to invest in expanding capacity across IT, property, and international operations in support of the next phase of growth.
Operating profit also showed an improvement growing from a restated 2.7% of revenues to 9.0%.

Revenue in the year was strongly weighted to the first half due to two significant factors. Firstly, the Board estimates that around $5 million

of H1 sales was associated with work to support the launch of a global streaming service in new countries. Unlike the typical usual month-
to-month flow of work orders from major clients, such launch-related work is one-off in nature and no such work occurred in H2. Going
forward the Board anticipates that international launches by new global customers may result in further instances of such non-repeating
revenues, however, as the business scales, these should result in lower levels of variability.

Secondly, a major client commenced a restructuring programme during ZOO’s FY23Q4 which caused a hiatus in the volume of orders
from this client, resulting in weaker than expected sales during February and March 2023. Ongoing conversations with the customer are
positive and although the restructuring programme is ongoing, we expect this to complete during ZOO’s FY24Q2 and have received initial
indications that, once the current industrial action has come to an end, orders will return to former levels in due course. In the medium
term the Board expects the restructuring to benefit ZOO due to its role as an E2E vendor.

As noted previously, the net number of individuals that make up ZOO’s freelancer pool continued to grow. As of 31 March 2023, the
number was around 11,500.

The ‘retained sales’ KPI is a proxy for customer satisfaction since it provides a measure of the proportion of client revenues retained
from FY22 to FY23. This metric improved to 98.5% indicating very high levels of customer satisfaction. This is further evidenced by the
performance metrics reported to ZOO by several of its customers; over the period under review ZOO’s average monthly performance
measure as reported by the Company’s largest customer was 99.53% which the Board believes places it as one of the best vendors in the
industry. The equivalent measure was 99.50% in FY22 and 99.46% in FY21 indicating the consistency of this high level of performance. The
quality and reliability of vendors are considerations that are highly important when customers assign projects to their selected partners
and ZOO’s performance ensures that it is viewed favourably.

The Company announced in February 2023 that it was selected as a key vendor for a major Hollywood content producer to support
its content localisation needs. This client will also use ZOOstudio to manage localisation work across all of its vendors. Following its
adoption in 2019 by a first major streaming customer, ZOOstudio is now a proven solution for delivering the volume and scale required for
an international, multi-language streaming platform. The Company is in dialogue with further major streaming companies concerning the
adoption of ZOOstudio.

During the period the Company made good progress on delivering its global growth initiative, first announced in October 2021. Through
this initiative, which involves establishing hubs in key locations to support the world’s biggest content creators and streaming services as
they serve new audiences, ZOO has already significantly enhanced its footprint around the globe.

With accelerating growth in the international distribution of regional content and the roll-out of global direct-to-consumer platforms,
ZOO has been pursuing a series of strategic investments that enhance its operations in the key content sourcing and distribution
locations. Countries announced previously were Turkey, South Korea, and India, which have complemented ZOO’s established operations
in Los Angeles, London, Sheffield, and Dubai.

ZOO is one of few global vendors with the proven capability to deliver complete E2E services to prepare content for audiences in all
languages and formats, thanks to its cloud-based technology and its ecosystem consisting of a collaborative network of independent
dubbing studios, vendor partners and freelance actors and translators. The global investments make ZOO even better placed to address
its clients’ challenges of localising and fulfilling huge volumes of content, as well as supporting the increasing need to prepare locally
acquired TV shows and movies for streaming services around the world.

The Company has taken a low-risk approach in its investments and acquisitions by targeting long-established businesses that have been
affiliate partners of ZOO for several years. These companies, which include media services providers and localisation vendors, have
accumulated extensive experience of working in the cloud-based technology that ZOO operates throughout its global ecosystem of
partners and freelancers. The all-encompassing approach supports unrestricted creativity while enforcing high standards of production
quality, workflow efficiency and content security across the entire global Group.

Following an initial March 2022 investment in 51% of a partner in Seoul and a very successful first year of operation, ZOO acquired the
remaining shares in April 2023. During the prior 12 months ZOO Korea expanded to deliver an in-territory servicing hub for the most
prestigious names in entertainment. The venture has helped to address the growing global demand for Korean content and distribution of
non-Korean titles in the country by supplying premium and secure dubbing, subtitling, quality control and media services. In the period,
two global streaming platforms worked with ZOO Korea and further significant new opportunities are in the pipeline.

Due to the increased volumes of work, additional investment in people and infrastructure was required to support demand and capture
the growing in-territory market for ZOO Korea’s services. The Board’s view was that it was commercially advantageous for ZOO Korea
to become a wholly owned subsidiary of the Group. While in FY23 ZOO Korea generated $1.2 million revenue and $0.1 million profit, the
Board estimates that $4.5 million of incremental revenues were recognised across the Group in the year because of ZOO Korea. The
Board expects that the hub will generate significant incremental Group revenue in future years through its own operations in country as
well as through servicing clients in the US and UK.

In April 2023, the Company announced that it had entered a formal process to acquire 100% of the share capital of one of its trusted
partners in Japan – a media localisation subsidiary of a leading Japanese technology company. An equity fundraise was completed to
provide sufficient capital to fully finance this proposed acquisition.

ZOO was chosen by the vendor as the preferred bidder for the purchase of the target which has been a trusted partner of ZOO for many
years and already works in the Company’s cloud-based platforms. These platforms will enable significant capital-efficient expansion of
capacity to fulfil Japanese language services at scale. Japan is a leading growth market for all global streaming services and, along with
South Korea, is a key target country in the South-East Asia region. Japanese subtitling is charged at the highest rate of any language, and
Japanese dubbing is the sixth most expensive. Delivering media localisation services in Japanese requires operations in the country due
to cultural factors, and consequently ZOO has to date fulfilled Japanese language services through outsourcing to partners in the country.

This proposed acquisition will provide the Company with experience and capability to deliver these services from within the Group,
enabling synergies due to margin enhancement resulting from this move from outsourcing to in-house. Consequently, the Board

Annual Report 2023ZOO Digital Group plcPage 31

anticipates that expansion of orders from ZOO’s clients will follow in line with the precedents in India and South Korea. The valuation and
timing of the acquisition are under negotiation as a consequence of the current industry challenges.

The countries in which dubbing has been established the longest are France, Italy, Germany, and Spain (“FIGS”). Originally the practice of
dubbing in these countries arose through a combination of economic, cultural, ideological, and political factors, with the tradition now
deeply rooted in their societies. As a result, the dubbing industries of those countries are unionised, and employment legislation requires
certain practices to be observed such that ZOO’s capability and capacity for delivering Parisian French, Italian, German and Castilian
Spanish will benefit greatly from having hubs in each country. The Company’s cloud-based platforms enable a flexible approach to the
delivery of dubbing services that affords substantially greater throughput from and flexibility of physical facilities than can be achieved by
the traditional process alone.

In May 2023, ZOO announced that it had acquired a 30 per cent. stake in AM Group for a total consideration of EUR 825,000 payable in
cash. The investment marks the continued expansion of ZOO’s geographic footprint in EMEA, with AM Group acting as a primary hub
for ZOO’s operations in Spain and Portugal. It will deliver dubbing services as part of ZOO’s global E2E offering for major studios and
streaming services in Iberia, while also supporting local content creators to expand their reach to global audiences.

Founded in 2004, AM Group has been a partner of ZOO since 2021 and is an approved service provider under the industry-wide Trusted
Partner Network. AM Group generated EUR 352,000 in profit before tax for the year ended 31 December 2022. It boasts state-of-the-
art facilities in both Madrid and Valencia with an adjoining dubbing school that actively provides practical training for voice talent, with
courses in dubbing, voiceover, and vocal technique.

Iberia is an increasingly important market for global content producers with Spain having become established as a key European hub
for audio-visual production and distribution. Building on the success of international hits such as Money Heist, Netflix launched its first
European hub in Madrid in 2019 and has since doubled the size of its operations. Other major US media companies have located their
European headquarters in the country. As well as strengthening capacity for Castilian Spanish and European Portuguese, ZOO’s presence
in Iberia will facilitate localisation into the co-official Spanish languages, bringing content from around the world to life in Valencian,
Catalan, Galician and Euskera.

The Company is in advanced stages of negotiations to establish hubs in the other FIGS locations, as well as in a select few countries
where a physical presence will be commercially advantageous.

Media Localisation
The services that fall into ZOO’s media localisation segment are predominantly subtitling and dubbing. Both services performed strongly:
subtitling grew by 15% over the prior year and dubbing by 73% to deliver segment sales of $56.6 million, up from $42.2 million in FY22. This
reflects underlying expansion of business, increase in market share and, in the case of dubbing, greater penetration of ZOO’s proposition
across additional languages.

Gross margins for media localisation also improved. ZOO’s cost of sales includes components that are external (freelancers and partner
studios) and internal (staff directly engaged in fulfilling these services). While subtitling delivered an incremental improvement with
margins up to 40% from 33% in the prior year, the period marked a step change in the development of the dubbing service with gross
margin improving from a restated 3% to 26%. This excellent performance was due to several factors including sales being significantly
improved and operations gaining the benefit of greater scale, a larger proportion of direct-to-talent projects as opposed to outsourcing
to traditional studios, and the investments in capacity that were made in earlier periods becoming productive.

Included in dubbing is the production of Audio Description (“AD”), a form of narration used to provide information surrounding key visual
elements in media for the benefit of blind and visually impaired audiences. Like subtitles for the deaf and hard of hearing, there is greater
demand to provide AD for more content not only in English-speaking countries (US, UK, and Australia) but increasingly for other regions.
In the period ZOO fulfilled for the first time AD orders for Latin Spanish, Brazilian Portuguese, Castilian Spanish, Turkish, Italian, German
and French.

Media Services
The media services segment includes a range of different activities in which the most significant categories are digital packaging,
metadata preparation and artwork. The segment overall delivered $32.1 million in sales, up 21.5% from $26.4 million in the prior year. Sales
relating to artwork production grew particularly strongly, while metadata, for which demand is greatest when delivering territory launches,
declined. Overall gross margin, after the FY22 restatement, improved from 55% to 61%, without the FY22 restatement margins would have
remained flat at 58%.

The period delivered strong growth of the mastering service introduced in the prior year, which involves optimising a digital original copy
of audio-visual materials for playback through specific channels, such as broadcast and streaming. Revenues have grown from $0.9 million
in FY22 to $6.5 million in FY23. This service provides good visibility, 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.

ESG
After setting up our social responsibility committee in FY22 and publishing our purpose statement, we have spent the last 12 months
setting up subgroups to manage our 16 objectives relating to our ESG strategy. This has resulted in the publication of our Environment
statement, Innovation statement and Diversity Equity and Inclusion statement, all of which can be found on our website. We have taken
steps to codify our approach to our local communities’ involvement through the launch of our ZOOgooders programme which allows
all staff two working days a year to devote to the charity of their choice. In addition, we have partnered with the RNIB to support greater
accessibility for all to media and entertainment. A similar scheme is being finalised with the Braille Institute of America. Finally, we are
calculating our carbon footprint and producing a plan to both reduce the footprint and look at ways to offset the impact.

Investing for future growth
On 27 April 2023, to support its proposed acquisition of a Japanese partner, the Company successfully completed an oversubscribed
placing of £12.5 million ($15.5 million) through the issue of 7,812,500 new ordinary shares in the Company with existing and new institutional
and other investors at a price of 160 pence per share. This price represented a discount of approximately 13.5% per cent. to the middle
market closing price on 26 April 2023. The shares placed represented approximately 8.7% per cent. of the issued share capital of the
Company prior to the placing. The Board, having consulted with several major shareholders prior to the placing, was pleased by the
support received from both existing and new shareholders and is delighted to welcome several new institutional investors to the share
register.

Alongside the placing the Company undertook a retail offer to enable existing shareholders to participate which raised additional gross
proceeds of £0.16 million, for which a total of 101,742 new ordinary shares were issued at 160 pence per share.

The Board intends to use the proceeds of the placing and retail offer to finance the acquisition of a partner in Japan and to provide
capital to fund several further investments and acquisitions that are in the pipeline, each of which will provide a hub in another key
location.

In the year capital expenditure grew 7% to $4.7 million compared to $4.4 million in FY22. The bulk of the spend was on computer
equipment to support our growth plans especially in media processing and mastering. This expenditure totalled $3.4 million and covered
our locations in Los Angeles, London, Dubai, Mumbai and Seoul. The expenditure on leasehold improvements dropped significantly to
$0.8 million from $2.1 million as we upgraded both Sheffield and Los Angeles in FY22.

The Board expects that by the end of FY24, through a combination of minority investments, acquisitions and organic growth initiatives,
the Company will have established hubs in each of the key territories that will be pivotal to enabling continuing strong growth and the
furtherance of the Company’s mission to be the entertainment industry’s most trusted globalisation service provider.

ZOO’s proprietary cloud platforms are central to the operation of all its international locations, delivering consistency of service offerings,
high quality, efficiency, security, and scalability. This ensures that the Company can flex quickly and efficiently and adapt to changing
volume requirements of customers as new industry developments unfold and further direct-to-consumer streaming services from US
media companies move ahead with their global roll-out.

Artificial Intelligence
Whilst Artificial Intelligence (AI) is a branch of computing that has been growing in applicability over recent years, the level of media
coverage and widespread interest in it increased substantially following the launch in November 2022 of ChatGPT, an AI chatbot
developed by OpenAI. ChatGPT is technology built on a Large Language Model (LLM), which is a computing system inspired by the
biological neural networks in human brains, that has been ‘trained’ on enormous volumes of text. LLMs are general purpose models which
excel at a wide range of tasks, as opposed to being trained for one specific task.

One of the areas where ChatGPT performs well is in natural language translation. A combination of the sophistication of its underlying
neural network, the expansiveness of the text data used for training purposes and the enormous computing resources that have been
deployed for building its LLM and operating the ChatGPT service have led to translation performance and quality that outstrips many
popular dedicated machine translation systems.

The Company has investigated the application of ChatGPT and, indeed, LLMs more generally, to determine their suitability for providing
some degree of automation to the services delivered by ZOO.

In the area of translation, it is important to recognise the profound differences between the tasks of, on the one hand, producing
convincing literal translations of the written word – an area where ChatGPT performs well – and on the other hand producing authentic
adaptations of dialogue. The latter is characterised by being highly contextual and where the capability (whether human or computer)
required to perform it entails an appreciation of culture, the motivation of speakers, ethnicity, social dynamics, and a host of other
considerations. Consequently, a process that works only with a transcript of the words spoken will be devoid of the broad scope of
information that is essential for producing authentic adaptations.

ZOO’s target customers are major global operators of streaming services and producers of premium entertainment content and
therefore the quality expectations for localisation and media services to fulfil their requirements are the highest in the industry. Here,
quality includes the authenticity of a language adaptation of an entertainment product and the extent to which it resonates with an
audience that speaks another language and operates within a different culture. At present, while technologies such as ChatGPT may be
effective in processing certain genres of media content (such as documentaries, where the commentary may suit a literal translation)
or low value catalogues (such as user-generated content or old materials that will be distributed through FAST channels in emerging
markets), they are not viable for the type and calibre of content processed by ZOO. However, the Company has since 2020 been actively
exploring opportunities to adapt such technologies to provide productivity and other benefits in certain scenarios where such use may
be beneficial.

There are other applications of AI that may be suitable for ZOO’s business and, indeed, another emerging area of commercial activity is in
various approaches designed to perform what has been termed ‘automated dubbing’. These too are areas where the quality of output is
improving rapidly due to advances in the application of neural networks, but where the technology is not currently capable of displacing
traditional practices for premium entertainment content.

Whilst the standard of these automated dubbing approaches applied to generalised content falls a long way short of the quality
requirements of ZOO’s clients, the Board believes that there may be applications of these technologies that can provide some
operational benefits to augment and complement the process of dubbing, rather than as a replacement for the creative human efforts
that are crucial to the production of authentic language adaptations. Indeed, the Company is actively engaged in several projects
to develop capabilities that are applicable to ZOO’s business, including through the exploitation of third-party tools, and where the
approach is to augment rather than displace established practices.

Annual Report 2023ZOO Digital Group plcPage 33

In summary, AI is an exciting field of computing that is being developed at pace and holds much potential, including in the field of ZOO’s
business. Its successful application in media and entertainment, particularly for premium content, will inevitably be alongside traditional
practices and the use of creative talent, and where ZOO’s heritage as an innovator and trusted partner to the leading names in the
industry places it well to become a leader in the field. Consequently, the Board regards AI as an opportunity for ZOO’s business rather
than a threat.

Outlook
Two recent and ongoing market developments mentioned previously have created a temporary reduction in the production of new
entertainment content and its localisation across the industry.

The first of these is the cost-saving measures that were initiated by several of ZOO’s largest clients beginning early 2023. These have
resulted in headcount reductions and operational reorganisation in major US media organisations that have caused a temporary
disruption of new title production and its distribution across streaming platforms.

The second is the industrial action by writers and actors which is unresolved as of the date of this document. It is not possible to have
certainty yet of when the strikes will end and there is media speculation they may continue until October 2023. This is causing a delay
in completing new programmes which is temporarily having an impact on the current volume of localisation and media services work on
new titles that is being commissioned.

However, despite this short-term industry-wide uncertainly, ZOO expects to be in an even stronger position with several customers
following a rationalisation of their supplier bases and to take further share of the media localisation market once former order levels
resume. At this stage, it is reasonable to expect this will be in H2 of our financial year.

Subsequent to the period end the Board has been taking steps to adjust the cost base to reduce the impact of the temporary industry
slow-down on ZOO’s business while there remains uncertainty around the timing of the resumption of former levels of production and
orders. The Group remains financially strong with net cash at 30 June 2023 of $23 million.

ZOO continues to have positive, advanced discussions with a leading Japanese technology company regarding the acquisition of its
localisation subsidiary.

The Board remains confident in the medium- and long-term fundamentals of the Company and expects to return to profitable growth
once market conditions normalise.

Stuart Green
Chief Executive Officer

FINANCIAL REVIEW

Introduction
During the year the Group built on the success of the financial foundations of the prior year to scale the business and increase margins
providing confidence in our long-term ambitions. We are now recognised as one of the major suppliers to the global localisation market.

Our acquisition in India has exceeded our initial projections and we are in the process of scaling up its capacity to more than double
revenues in FY24. After the year-end in April 2023, we completed a fundraise injecting $15.5 million of cash into the business to further
expand our global footprint which we expect to use to acquire one of the Company’s trusted partners in Japan to act as a hub to assist
us to achieve our medium-term financial goals. This will allow us to support our major customers in strategic markets and cement long-
term supply agreements. The financial performance in the year has reinforced the strength of the business with an operating profit of
$8.1 million (FY22 restated $1.9 million) contributing to Net Assets growing to $35.1 million (FY22: $25.0 million) and a net cash balance of
$11.8 million (FY22: $6.0 million).

The FY22 cost of sales has been restated to reflect the correct interpretation of IFRS 15. More details can be found in note 34 to the
financial statements.

Revenue
In the financial year ended 31 March 2023, total revenues grew 28% to $90.3 million (FY22: $70.4 million). 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 support their subscriber bases.

Most of the Group’s operations are in the United States, where revenues were up 16% at $71.2 million. The balance of work was
performed in Europe which grew by 85% to $17.0 million and India which made an initial contribution to work of $2.1 million. The split in
geographical production reflects the international launches of US based streaming operators.

Customer concentration reduced during the period with the revenue contribution from our largest client falling slightly to 74% of sales
(FY22: 78%) as a consequence of growth in orders from four US based content owners. The second largest customer accounted for 4%,
down slightly from 6% last year. These two contracts are expected to continue over the 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 34%
in the year to $56.6 million (FY22: $42.2 million), as our dubbing service gained further commercial traction in the market. As other US
streaming services launch their international services, we expect future growth in revenues from new customers.

Media services revenues increased by 22% to $32.1 million (FY22: $26.4 million) as our mastering service delivered a full year’s
contribution which offset a drop in services related to international launches.

Software solutions, the segment that has been a reducing proportion of our business, decreased by 13% in the year to $1.6 million. We
expect this segment will continue to decline in future years.

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 grew by 63% to $33.9 million (FY22 restated:
$20.8 million). This represents a gross profit margin of 38%, up from 30% last year, driven by increased gross profit of the dubbing service.

Media localisation contribution grew in the year from $8.8 million to $18.9 million an increase of 115% driven by the revenue growth in
both subtitling and dubbing and the improvement in project profitability as well as the restatement of costs contributing 8%. The growth
in contribution of this segment was higher than that of the revenue as the significant revenue growth contributed to a higher utilisation of
our staff. The contribution percentage of 33% is in line with our long-term ambitions.

Media services contribution grew to $19.5 million up 35% on last year. The contribution from this revenue stream of 61% was up 6% on
the previous year due to the restatement, prior to the restatement margins were flat at 58%. This is expected to improve in future years
as metadata work reduces leading to an increase in the contribution margin.

Software solution segment contribution fell 9% points to 84% in the year, as a result of the drop in revenues.

Annual Report 2023ZOO Digital Group plcPage 35

Other operating expenses
Operational fixed costs, which are defined as operating expenses less share-based payments, depreciation and amortisation, have
increased by 32% in the year as we invested heavily in people and IT to support our future growth plans. Overall, operating expenses
increased to $25.9 million, including share-based payments, depreciation and amortisation. The 35% increase in operating expenses is
explained by the above, higher depreciation, and a one-off charge for share based payments.

Finance costs
Finance costs dropped considerably in the year from $2.1 million in FY22 to $0.4 million in FY23. The major reason for the decrease was
the redemption of the loan notes in FY22 which gave rise to a non-cash charge of $1.6 million in that year. There was also an exchange
gain of $0.2 million in the year which further improved presentation of finance costs.

As a result of the increase in revenues and a major improvement in gross profit, the operating profit increased 330% to $8.1 million
compared to a restated $1.9 million last year. On the Company’s preferred measure of profitability, being EBITDA before share-based
payments, the profit was $15.5 million, up from a restated $7.1 million in FY22, an increase of 119%.

Profit before tax was $7.9 million compared to a restated loss of $0.2 million, resulting from the revenue growth, the improvement in
margins and the absence of a fair value provision offsetting the increase in overheads.

The Group has reviewed the recent profitability of its US subsidiary and the expected growth in profits over the next two years and has
concluded that it is appropriate to include a deferred tax asset of $1.7 million in this year’s results to reflect the probable utilisation of
unused tax losses in the US subsidiary. This has resulted in a profit and loss credit of $0.2 million (FY22: $1.3 million).

Statement of financial position
Non-current assets increased by 8% in the period. The Company invested $4.7 million in computer equipment to expand production
capacity and increased lease commitments by $0.8 million to support the uplift in staff.

The capitalisation of research and development costs increased by 29% to $2.2 million as we accelerated the product roadmap to
support customer requirements and upgraded our internal production systems. This also increased the depreciation charge resulting in
the balance sheet asset increasing by 25% to $3.3 million. The deferred Tax asset increased by $0.2million reflecting the recoverability of
net operating losses in the US.

Trade and other receivables decreased 28% to $16.5 million (FY22 restated: $23.0 million) reflecting the strong sales performance in the
first half of the year. This decrease was mirrored in trade and other payables as work performed by suppliers and freelancers peaked
in H1 to support our customer deliveries. Contract assets, which represent work in progress and sales accruals on customer projects,
increased by 33% to $4.8 million as certain projects had not completed at year-end and were invoiced in April and May 2023.

Current borrowings increased by 7% to $1.4 million and represent the lease commitments over the next 12 months.

Current liabilities have fallen significantly in the period due to the lower level of sales in FY23Q4 which has resulted in both trade
payables and accruals decreasing due to the pause in customer orders.

Cash and cash equivalents of $11.8 million at year end (FY22: $6.0 million) were up 97% as a result of the improvement in profitability and
strong cash collections.

Non-current liabilities decreased in the year due to the reduction in the “right to use” liability on our property leases with both Sheffield
and Los Angeles having one less year to run.

Consolidated statement of cash flows
Net cash generated from operating activities was $15.5 million, up from $5.2 million in FY22. The increase of $10.3 million is attributable to
the decrease in trade receivables compared to last year offsetting the decrease in trade payables and the increase in the operating profit.
The inflow from operating activities was reduced by a $8.2 million spend on investing activities, which was a reduction of $2.1 million on
FY22. The reduction was due to the acquisitions in FY22.

Overall, the Group had a net inflow of $5.9 million compared to $3.0 million in FY22 as the cash flow from operations more than offset the
fundraise in FY22.

Post balance sheet events and going concern
On the 5th April 2023, we completed the acquisition of the remaining 49% of ZOO Korea that was owned by minority shareholders.
We issued 550,000 ordinary shares in ZOO Digital Group plc to the exiting shareholders of ZOO Korea and made a one-off payment
of $200,000 in consideration for their 49 per cent stake. The acquisition reflects the success of the initial investment and the outlook for
media localisation in the region.

In April 2023 we completed a placing and retail offer of new equity raising a gross $15.8 million to fund the proposed acquisition of a
business in Japan and accelerate our international footprint. The Company raised gross proceeds of £12.7 million ($15.8 million) through
the oversubscribed placing of 7,914,242 Ordinary Shares with certain existing and new institutional and other investors at a price
of 160 pence per New Ordinary Share. The shares were admitted to trading on 4 May 2023 and 12 May 2023.

On the 4th May we acquired 30% of AM Group in Spain for €825,000. The investment marks the continued expansion of ZOO’s
geographic footprint in EMEA, with AM Group acting as a primary hub for ZOO’s operations in Spain and Portugal. It will deliver dubbing
services as part of ZOO’s global end-to-end offering for major studios and streaming services in Iberia, while also supporting local
content creators to expand their reach to global audiences.

Going forward the business remains confident that it has sufficient headroom to trade for the foreseeable future, as the recent fundraise
coupled with the renewed $5 million invoice discounting facility from HSBC gives us the working capital headroom for the next phase
of our expansion. The budget for FY24 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 and over 79% 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 monitors currency transactions taking proactive actions when
appropriate.

Political uncertainty
The political climates in the UK and US are currently challenging due to the global economic environment. Although the terrible situation
in 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 US.

By order of the Board

Approved by:

Phillip Blundell
Director and Secretary

9th August 2023

Annual Report 2023ZOO Digital Group plcPage 37

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. The group has three independent non-executive directors. Gillian Wilmot is the Board
Chairman, Nathalie Schwarz chairs the Remuneration Committee and Mickey Kalifa is the chair of the Audit Committee.

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 June 2023. The major recommendation was
to instigate a formal process for succession planning which is expected to be completed by the end of September 2023. 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 and included one or more presentations for retail investors, we have actively promoted our AGM as a forum to
present to and meet with investors, and presented at investor conferences. 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 multiple facilities on each project. During the period the group operated a hybrid working model allowing
staff to work from home and deliver uninterrupted service and maintain the same high standards of quality and security, as well as
attending the office when required, without any interruption in productivity.

• 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 during
the COVID-19 pandemic.

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:

Description

Participants

Comments

Date

Apr 22

Ad hoc wealth manager calls

Calls with equities research analysts

SG, PB

Apr 22

Ad hoc institutional investor calls

SG, PB

May 22

Ad hoc institutional investor calls

SG, PB

May 22

Retail investor event

May 22

Investor newsletter

SG, PB

Jun 22

Retail investor presentation

SG, PB

Jun 22

Jul 22

New York institutional investor
meetings

Preliminary results roadshow and
media meetings

Jul 22

Retail investor meeting

Jul 22

Participation in retail investor online
event

Jul 22

Vox Markets podcast

SG, PB

Jul 22

Wealth Manager and PCB webinar

SG, PB

Jul 22

Broker sales team meetings

Aug 22

Investor newsletter

SG, PB

Sep 22

AGM

SG, PB, GD,
GW, MK, NS

Sep 22

Ad hoc institutional investor meetings

SG, PB

Sep 22

Media interview

Oct 22

Ad hoc institutional investor meetings

SG, PB

Oct 22

Capital Markets Event

SG, PB, GD

Calls with Private Client Brokers and Wealth Managers

Provided updates to equities analysts following pre-close
trading update

Several ad hoc calls requested by institutional shareholders
and non-holders following pre-close trading update

Participated in Mello with an exhibit and provided two
presentations to predominantly retail investor audiences

Investor e-newsletter including CEO video distributed to
subscribers

Delivered a presentation to the Active Investors Group of
retail investors

Participated in the Stifel Technology conference in New
York and presented to several institutional investors

Institutional investors, analysts, and PCBs via in-person
meetings and Zoom calls

Open invitation to retail investors; virtual presentation and
Q&A; recording made and published via website

Delivered a presentation to the Mello Monday livestream
for retail investors

Podcast interview with Vox Markets which was
subsequently published

Delivered a webinar for wealth managers and PCBs to
include prelim results

Presented to the sales teams at multiple broking firms

Investor e-newsletter including CEO video distributed to
subscribers

Actively encouraged all shareholders and prospective
investors to attend a meeting held in person in Sheffield
and live streamed; event made available on website
subsequently

Several ad hoc meetings and Zoom calls requested by
institutional non-holders in UK and US

Interview with reporter from The Times with an article
subsequently published

Several ad hoc meetings and Zoom calls requested by
institutional non-holders in UK and US

Delivered a Capital Markets event with participation and
presentation of senior staff from across the ZOO business

Annual Report 2023ZOO Digital Group plcDescription

Participants

Comments

Page 39

Date

Oct 22

Nov 22

Ad hoc retail investor meetings

Interim results roadshow and media
meetings

Nov 22

Retail investor meeting

Nov 22

Retail investor event

Nov 22

Site visit

New York investor meetings

Dec 22

Retail investor webinars

SG, PB

Dec 22

Ad hoc institutional investor meetings

SG, PB

Dec 22

Investor newsletter

Jan 23

Ad hoc institutional investor meetings

SG, PB

Jan 23

Feb 23

Institutional investor meetings

Fireside chat

Feb 23

Media interview

SG, PB

Feb 23

Ad hoc institutional investor meetings

SG, PB

Feb 23

Proactive Investors interview

Feb 23

Broker sales team meetings

Investor newsletter

SG, PB

Mar 23

Ad hoc institutional investor calls

SG, PB

Met with significant retail investors

Institutional investors, analysts, and PCBs via in-person
meetings and Zoom calls, including meetings in Frankfurt

Open invitation to retail investors; virtual presentation and
Q&A; recording made and published via website

Participated in Mello with an exhibit and provided two
presentations to predominantly retail investor audiences

Hosted a site visit for an institutional investor in Sheffield

Participated in Stifel New York Discovery conference and
held separate in-person institutional investor meetings

Gave two virtual presentations to wealth managers and
PCBs

Calls with institutional shareholders and non-holders in UK
and US

Investor e-newsletter including CEO video distributed to
subscribers

Calls with institutional shareholders and non-holders in UK
and US

In-person meetings with institutional investors in Edinburgh

Held two ‘fireside chats’ with GD covering investors and
non-holders, with a recording being made available to
investors subsequently

Interview with reporter from The Telegraph with an article
subsequently published

In-person meetings and calls with institutional shareholders
and non-holders in UK and US

Video interview with Proactive Investors which was
subsequently published

Presented to the sales teams at multiple broking firms

Investor e-newsletter including CEO video distributed to
subscribers

Calls with institutional shareholders on request in UK and
Europe

Mar 23

Analyst meetings

SG, PB

Met with analysts in person

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. Most meetings with shareholders and potential investors are arranged
by the broking teams of our joint brokers. 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.

Clients – our success and competitive
advantage are dependent upon fulfilling
client requirements, particularly in
relation to quality of service, its speed of
delivery and security.

Understanding current and emerging
requirements of clients enables us to
develop new and enhanced services,
together with software to support the
fulfilment of those services

Suppliers – a key supplier group is our
network of freelancers who fulfil linguistic
services.

Freelance workers will provide similar
services to other organisations,
including our competitors, so we must
ensure they are available to us and are
accommodating.

Shareholders – as a public company
we must provide transparent, easy-to-
understand and balanced information to
ensure support and confidence.

Meeting regulatory requirements and
understanding shareholder sentiments
on the business, its prospects and
performance of management.

Industry bodies – the services we
provide must meet certain requirements.

The views of certain industry groups,
including the Motion Picture Association
of America (MPAA), the Trusted Partner
Network (TPN) and the Entertainment
Globalisation Association (EGA) are
influential in the way the group is
perceived by certain clients.

Monthly staff briefings delivered to all
locations by webcast.

Invitation to staff to ask questions of
management that are answered in the
briefings.

Operation of an employee
communications platform to provide
ad hoc news, industry developments
and other information to all staff in an
accessible way.

Annual engagement survey.

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 several large
media organisations.

We optimise our systems to simplify the
work of freelancers as much as possible,
including in relation to administration of
projects.

We operate systems to ensure that
supplier invoices are processed and paid
promptly.

These have led to a large, growing and
supportive freelancer network.

Regulatory news releases.

Keeping the investor relations section of
the website up to date.

Quarterly investor newsletters.

Participation at investor events.

Publishing of videos of investor
presentations and interviews.

Annual and half-year reports and
presentations.

AGM.

We believe we successfully engage with
our shareholders; over the past 12 months
this engagement has led to support for
the group.

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.

Annual Report 2023ZOO Digital Group plcStakeholder

Reason for engagement

How we engage

Page 41

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.

Operation of ZOOgooders programme
which provides all staff with two paid
days per year to work for a charity of
their choice.

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 key themes of our Environment, Social and Governance strategy are to grow globally in a smarter, easier and better way ensuring we
scale up responsibly.

People
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 them informed of progress. The Board
has expanded the internal communication network to include all sites across the globe involving more contact, more frequent
communication and more opportunities for feedback. 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
FY23 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 Board has initiated a diversity strategy and is measuring our performance for future benchmarking.

The current gender analysis is as follows

Executive board members

Senior Managers

Staff

Total

Non-Executive Directors

Female

229

238

Male

357

378

Total

594

624

Diversity, Equity and Inclusion
The group gives full consideration to applications for employment from disabled persons where the candidate’s particular aptitudes
and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees for

training, career development and promotion.

Where existing employees become disabled, it is the group’s policy to provide continuing employment wherever practicable in the same
or an alternative position, and to provide appropriate training and reasonable working environment adjustments as required to achieve
this aim.

The company launched its first diversity and inclusion survey in 2022 and published its results to the workforce. This was followed up
with the company hosting its two Diversity, Inclusion, Equity and Belonging forums attended by people across the business to understand
our employees’ experiences and action plans.

A part of the company action plan was to form the DIEB (Diversity, Inclusion, Equity and Belonging) forum and through collaboration the
company has developed several Employee Resource Groups (ERGs) hosted through the company’s employee communication platform
(ZOOconnect). These spaces have been designed for employees to share experiences, promote awareness, allyship and educate in all
areas such as LGBTQ+, Neurodivergence, visible and non-visible disabilities and launching soon, marginalised religious groups and female
leadership. These initiatives have created a platform (within the already successful ZOOconnect) that the people of ZOO can access to
learn. The company is actively working with its DIEB champions to increase the number of ERG spaces over the next 12 months.

The company has founded a group of DIEB champions across the business who support and facilitate events and opportunities for all
colleagues, driving a positive, inclusive and thus engaged workforce.

Through active collaboration with the DIEB champions the company has increased its promotion and celebration of international
awareness days through its internal communication platform and will continue with this over the next 12 months. This has included
educational pieces, sharing of employee stories and experiences, training and events. Past events have included ADHD month, Mental
Health and Wellbeing, Black History Month, Dyslexia and Autism Awareness and Trans Day of Visibility.

The company will continue to focus our development and DE&I programs on growing the number of female and minorities represented in
leadership roles. The company will continue to invest in female leadership development programmes over the next 12 months.

As part of its DE&I initiatives the company continues to review its hiring practices. The company promotes and invests in apprenticeship
programs to complement its strategy to diversify the workforce, along with internal mobility opportunities across the business. The
company believes that apprenticeships and cross training provide access to career opportunities that not only offer paths to higher-
paying jobs, but also better opportunities for its workforce.

With the board’s support and guidance from our HR department, we have taken significant actions to enhance our diverse and inclusive
culture, train and educate our employees, to maintain and increase our commitment as a great place to work.

Community
The pandemic accelerated trends that are reshaping the way of work including what employees expect employers to provide in terms
of working arrangements. With the increase in hybrid and remote working, employees are looking for more rewarding, engaging and
meaningful workplace experiences.

Through listening to its employees, the company launched its first employee volunteering programme (ZOOgooders) last year which
actively encourages all staff to take two additional paid leave days each year and donate them for the support of charitable projects in
the community as a way to give back to local communities and increase our employees’ sense of purpose and improve engagement.

Following its launch in September 2022, employees across the UK and US participated in 375 hours or volunteering activities that either
had been arranged by the company or by the individual. During this first year some charities supported through volunteering included:

•

SCCC knit a winter blanket appeal, gifting the elderly with handmade blankets.

Ben Centre - This charity aims to provide a safe space and an open hand to those who suffer through substance misuse and its
associated barriers.

• Cavendish Cancer Care - Providing support to people affected by cancer.

•

Live Love Animal Rescue - A charity that partners with local shelters to save homeless animals by providing them a lifelong
commitment.

• Heal the Bay Adopt-A-Beach - A programme that gives groups the opportunity to learn about and participate in the conversation

of outdoor places in California.

• American Red Cross Blood Drive.

Our target is to double the number of volunteering hours over the next 12 months and to continue the partnerships formed with local
charities.

The Company has made several small direct financial contributions to charities over the past year. The Company decided to let its
employees guide the choice of organisations that ZOO should adopt as its main charities. Our employees were presented with several
charities that aligned to our company and voted to endorse the RNIB in the UK and the Braille Institute in the US. The Company will
be working towards several initiatives to make the workplace more accessible to the sight impaired and make entertainment more
accessible to those who are sight impaired.

The recycling of IT equipment that is no longer required in the business has been started, working with a local charity that can repurpose
the equipment for local and international use. In the UK we are now recycling 100% of such equipment. In the coming year we hope to
extend the scheme to the US.

Annual Report 2023ZOO Digital Group plcPage 43

Environment
In the year we have developed and published our Environmental policy.

ZOO is a technology first service group that has developed platforms that deliver media localisation projects in an efficient and
environmentally friendly way by reducing travel and the need for carbon intensive buildings. We are committed to further innovation to
support our customers and freelancers in reducing their impact on the environment.

We also recognise that as a company we do have a small impact on the environment relative to other industries and as such will
constantly look for ways to reduce and ultimately eliminate our environmental footprint and meet relevant environmental legislation. To
achieve this our environmental strategy will focus on:

• Working with suppliers with a responsible attitude to the environment

•

Eliminate waste within our offices

• Operating to international and local environmental laws and regulations in all countries in which we operate

• Actively promoting recycling in all our locations

•

Source locally to reduce carbon emissions

Reducing our water consumption

We are currently measuring the impact on the environment in FY23 which we will publish and use for future performance measurement.

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.

We operate 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 People and Culture team has been very busy supporting enhanced health and safety procedures in our upgraded offices – offering
support to our working from home initiative and operating 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 every month 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 every month 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:

Executive Directors

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

–

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.

Gillian Wilmot CBE, 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,
Non-Executive Chairman of Synalogik.

Time commitment: two to three days per month.

Mickey Kalifa, Independent Non-Executive Director
Term of office: Joined as Non-Executive Director on 5 October 2017; Chair of the
Audit Committee and member of the Remuneration Committee.

Background and suitability for the role: Mickey is a Chartered Accountant and
finance professional with nearly 30 years’ experience across the technology,
media and gaming sectors. Mickey was appointed CFO of digital agency Dept
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.

Annual Report 2023ZOO Digital Group plc
Page 45

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.

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 23 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.

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
A board evaluation process led by the Chairman took place in June 2023. 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 several areas including general supervision and oversight, business risks and trends, succession and
related matters, communications, ethics and compliance, corporate governance and individual contribution.

Several refinements in working practices were identified as a result of this exercise and are in the process of being 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 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 FY23 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.

Annual Report 2023ZOO Digital Group plcPage 47

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, the US-based Chief Operations Officer and the CTO, operates as a
management committee, chaired by the CEO, which reviews operational matters and performance of the business, and is responsible for
significant management decisions while delegating other operational matters to individual managers within the business.

The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the group. She leads
and chairs the board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that
performance of individual directors, the board and its committees are reviewed on a regular basis, leads in the development of strategy
and setting objectives, and oversees communication between the group and its shareholders.

The CEO provides coherent leadership and management of the group, leads the development of objectives, strategies and performance
standards as agreed by the board, monitors, reviews and manages key risks and strategies with the board, ensures that the assets of the
group are maintained and safeguarded, leads on investor relations activities to ensure communications and the group’s standing with
shareholders and financial institutions is maintained, and ensures that the board is aware of the views and opinions of employees on
relevant matters.

The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by the board,
making operational and financial decisions required in the day-to-day operation of the group, providing executive leadership to managers,
championing the group’s core values and promoting talent management.

The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their external
experience and knowledge, scrutinise the performance of management, provide constructive challenge to the Executive Directors and
ensure that the group is operating within the governance and risk framework approved by the board.

The Company Secretary is responsible for providing clear and timely information flow to the board and its committees and supports the
board on matters of corporate governance and risk.

•

The matters reserved for the board are:

Setting long-term objectives and commercial strategy;

• Approving annual operating and capital expenditure budgets;

• Changing the share capital or corporate structure of the group;

• Approving half year and full year results and reports;

• Approving dividend policy and the declaration of dividends;

• Approving major investments, disposals, capital projects or contracts;

• Approving resolutions to be put to general meetings of shareholders and the associated documents or circulars; and

• Approving changes to the board structure.

The board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared
and will monitor the suitability of this Code on an annual basis and revise its governance framework as appropriate as the group evolves.

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant
stakeholders

In addition to the investor relations activities described above, the following Audit and Remuneration committee reports are provided.

Audit Committee Report
During the year, the Audit Committee has continued to focus on the effectiveness of the controls throughout the group. The Audit
Committee consists of Mickey Kalifa, chair, Gillian Wilmot and 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 that an appropriate proportion of the package is determined by targets linked to the Group’s performance.

Ensure the total reward cost to ZOO are affordable and sustainable.

Component

Base salary

Purpose and link to
strategy

To provide a competitive
base salary to attract,
motivate and retain directors
with the experience and
capabilities to achieve the
strategic aims.

Benefits

To provide a market
competitive benefits
package

Pension

To provide an appropriate
level of retirement benefit

Operation

Maximum

Performance measure

Reviewed annually
against salary surveys
for market rate, Group
performance, role and
experience.

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.

No overall maximum,
however, they are
reviewed to ensure
they are proportionate
and fair when
compared to other
salaries in the Group.

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

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.

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.

Minimum of 80% based on
financial performance and a
maximum of 20% linked to
smart personal objectives.

Performance metrics
will be linked to financial
performance.

Shareholdings

To promote share ownership
for Executive Directors

Executive Directors are
encouraged to build
a shareholding in the
Group over time.

No maximum

N/A

Explanation of performance measures
Performance measures are selected that are aligned with the performance of the Group and the interests of shareholders. Stretching
targets are set each year for the annual bonus and long-term incentive awards. When setting these performance targets, the Committee
will consider several different reference points, which may include the Group’s business plan and strategy and the economic
environment.

The Committee retains the ability to adjust or set different performance measures if events occur which cause the Committee to
determine that the measures are no longer appropriate, and that amendment is required so that they can achieve their original purpose.
Awards and options may be adjusted in the event of a variation of share capital in accordance with the rules of the share option scheme.

Annual Report 2023ZOO Digital Group plcPage 49

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 55.

By order of the board

Gillian Wilmot
Chairman

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 act in a manner consistent with this statement, and in doing so they promote the success of the Company for the
benefit of its shareholders, taking into consideration the interests of all stakeholders.

In this statement we outline the key aspects of our approach to section 172 and how our Directors have fulfilled their duties throughout
the year. In summary, the Directors have consistently acted in accordance with their duties under section 172, working diligently to
promote the success of ZOO and safeguard the interests of shareholders and stakeholders alike. We will continue to uphold these
principles as we navigate the challenges and opportunities ahead, striving to create lasting value for all those connected to our business.

1. The likely consequences of any decisions in the long term

Our Directors are committed to making strategic decisions that drive long-term growth and value creation for our shareholders.
This includes investments in development, forming strategic partnerships, and expanding both our service offerings and geographic
footprint to achieve further market penetration.

2. The interests of the company’s employees

Details of how the Directors have engaged with employees is provided in our Corporate Governance Statement.

We recognise the importance of attracting, retaining, and developing a talented workforce. We are committed to providing a safe and
inclusive working environment, offering competitive remuneration packages, and investing in training and development programmes
to help our employees reach their full potential.

3. The need to foster the company’s business relationships with suppliers, customers, and others

Details of our approach to stakeholder engagement is provided in our Corporate Governance Statement.

4. The impact of the company’s operations on the community and environment

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.

5. The desirability of the company maintaining a reputation for high standard of business conduct

The Company has taken a low-risk approach in its investments and acquisitions by targeting long-established businesses that
have been affiliate partners of ZOO for several years. These companies, which include media services providers and localisation
vendors, have accumulated extensive experience of working in the cloud-based technology that ZOO operates throughout its
global ecosystem of partners and freelancers. The all-encompassing approach supports unrestricted creativity while enforcing high
standards of production quality, workflow efficiency and content security across the entire global Group.

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.

6. The need to act fairly between members of the company

Details of our decision making in this respect are provided in our Corporate Governance Statement.

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 has improved staff
engagement, as evidenced by the most 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 approved after the year-end the fundraise to expand our presence in Japan.

To address the need to support our customers on a global basis the Board approved two strategic investments after the year-end
that support our aim to be a global media localisation partner to the major US media corporations.

Annual Report 2023ZOO Digital Group plcPage 51

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 joint broker
Stifel Nicolaus Europe Limited
150 Cheapside,
London,
EC2V 6ET

Joint broker
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX

Auditor
Grant Thornton UK LLP
No 1 Whitehall Riverside
Leeds
LS1 4BN

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

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 2023.

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 25 to 33.

The audited financial statements for the year ended 31 March 2023 are set out on pages 68 to 112. 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. (2022: nil)

Going concern
The directors have prepared trading and cash flow forecasts for the group for the period to 31 March 2025 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 renewed for a further
year to 1 June 2024. 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

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 2023 are disclosed in the Directors’ Remuneration report. In accordance with the company’s
Articles of Association, Mickey Kalifa and Gordon Doran 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.

Annual Report 2023ZOO Digital Group plcPage 53

Financial risk management
The financial risk management is included in the Strategic Report and in note 28.

Substantial shareholdings
At 31 July 2023, the company had been notified, in accordance with sections 791 to 825 of the Companies Act 2006, of the following
interests in the ordinary share capital of the company:

Name of holder

Canaccord Genuity Group Inc

Dr S A Green*

Herald Investment Trust plc

Invesco Ltd

Stonehage Fleming IM Limited LLC

Janus Henderson Investors

Deka Investment

*Shareholdings of directors include any interests of a “connected person”.

Percentage held

13.53%

11.72%

9.90%

6.57%

4.79%

4.61%

3.57%

Number

13,223,616

11,458,972

9,681,978

6,424,607

4,686,739

4,510,000

3,494,200

Directors’ responsibilities statement
The directors are responsible for preparing the Annual 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 to prepare
the financial statements in accordance with UK-adopted international accounting 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 UK-adopted international accounting standards 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.

To the best of my knowledge:

•

the group financial statements, prepared in accordance with UK-adopted international accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the
consolidation taken as a whole; and

the Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the
position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.

The names and functions of all the directors are stated on pages 44 - 46.

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 9th August 2023

Phillip Blundell
Director and Secretary

Annual Report 2023ZOO Digital Group plcPage 55

REMUNERATION COMMITTEE REPORT
I am pleased to present the remuneration committee report for FY2023, which sets out the remuneration earned and paid to Directors in
the year ended March 2023.

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 56 to 59 provides details of the amounts earned in respect of the year ended 31
March 2023 and how Directors’ Remuneration Policy has operated and will be subject to an advisory shareholder vote at the 2023 AGM.

Review of the year ended 31 March 2023

As described earlier in the annual report, the Company has exceeded its financial goals for the year, achieving revenue growth of 28%
and adjusted EBITDA growth of 119%. As a result of this performance the Executive Directors achieved an annual cash bonus of 132% of
their on-target earnings which is between 61% and 94% of their base salary. The payment of this bonus is subject to the approval of the
remuneration committee.

No share options held by the Executive Directors vested in the period, nor were there share option grants in the year.

Outlook for FY2024

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 2024:

•

The committee determined it was appropriate to increase the base salaries of the 3 Executive Directors by 4% to reflect market
rates for similar companies, recognising that there is high inflation and the average companywide increase of 4%.

• 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 determined that it was not appropriate to grant further long-term incentives at this stage. The committee agreed
to review the broader remuneration policy and to make recommendations in due course.

On behalf of the Board

Chairman of the Remuneration Committee

DIRECTORS’ REMUNERATION REPORT

Directors’ remuneration report
The directors’ remuneration report is presented as a voluntary disclosure in order to aid the understanding of the financial statements.

The Remuneration Committee
During the year ended 31 March 2023 the Remuneration Committee consisted of all non-executive directors, and was chaired by Nathalie
Schwarz.

The Remuneration Committee is responsible for determining the executive directors’ remuneration packages, including bonuses, share
options and other incentive schemes.

Executive directors
The committee aims to ensure compensation is fair and reasonable and that it motivates the executive directors in both the short and
long-term.

The remuneration packages include:

•

Basic salary

• Defined contribution to personal pension plans

•

Private medical insurance

• Discretionary bonus

•

Share options

Non-executive directors
Gillian Wilmot, Mickey Kalifa and Nathalie Schwarz are paid as employees for their board services.

Directors’ remuneration
Directors’ remuneration for the year to 31 March 2023 is:

Dr Stuart A Green

Gordon Doran

Phillip Blundell

Gillian Wilmot

Mickey Kalifa

Nathalie Schwarz**

Salary

$000

Bonus*

$000

291

414

235

292

340

146

Benefits Sub total

Pension

2023 Total

2022 Total

$000

583

781

381

591

781

381

$000

615

726

456

1,931

1,103

778

1,908

1,918

* The payment of the bonus for the year ended 31 March 2023 is subject to the approval of the remuneration committee.
** Nathalie Schwarz was appointed on 13 January 2022
Of the above, the following directors were remunerated in pound sterling for the year to 31 March 2023. The pound sterling amounts are
shown below:

Annual Report 2023ZOO Digital Group plcPage 57

Salary

£000

241

194

577

Bonus

£000

238

119

Sub
total

£000

479

313

357

934

Pension

2023 Total

2022 Total

£000

485

313

942

£000

458

343

905

Dr Stuart A Green

Phillip Blundell

Gillian Wilmot

Mickey Kalifa

Nathalie Schwarz

Gordon Doran is remunerated in US dollars.

Three directors (2022: 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.

2023

$000

781

2022

$000

726

Directors’ share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the company
granted to or held by the directors. Details of the options are as follows:

Name of
director

Stuart A Green

Gordon Doran

1 April
2022

150,000

175,000

150,000

Gordon Doran

250,000

Gordon Doran

1,500,000

Gordon Doran

1,000,000

Mickey Kalifa

30,000

Phillip Blundell

Gillian Wilmot

Gordon Doran

150,000

50,000

110,000

Phillip Blundell

400,000

Gordon Doran

Phillip Blundell

150,000

4,265,000

Granted
during the
year

Exercised
during the
year

Surren-
dered
during the
year

31 March
2023

Exercise
price ($)

Exercise
price (£)

Date from
which
exercise-
able

150,000

300,000

175,000

250,000

1,500,000

1,000,000

30,000

150,000

50,000

110,000

400,000

150,000

3,965,000

$0.23

$0.20

$0.23

$0.20

$0.49

$0.80

$0.89

$1.76

15.00p*

15.25p**

15.00p*

15.00p

15.25p**

15.25p***

37.50p

63.00p

72.5p****

1.30****

Jul-13

Sep-17

Jul-13

Jan-16

Sep-17

Aug-18

Oct-18

Jun-20

May-21

Jan-23

Expiry
date

Jul-22

Aug-27

Jul-22

Jan-25

Aug-27

Oct-27

Jun-29

May-30

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 2022.

**** 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 2020 is staggered over the exercise period with typically 40% exercisable
after the first year and a further 30% in each of the next two years.

The charge to profit or loss in respect of directors’ share options amounted to $105,000 (2022: $88,000).

The market price of the ordinary shares at 31 March 2023 was 242 cents (197.55p) and the range during the year was 255 cents (207.5p)
(high) to 127 cents (102) (low).

Service contracts
The service contracts and letters of appointment of the directors include the terms in the table below.

All the directors are on rolling director appointments and offer themselves for re-election by rotation in accordance with the company’s
Articles of Association.

Upon termination of their service agreement, executive directors are entitled to salary equivalent to their notice period.

Name of director

Executive directors

Dr Stuart A Green

Phillip Blundell

Gordon Doran

Non-executive directors

Gillian Wilmot

Mickey Kalifa

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

Annual Report 2023ZOO Digital Group plc

Directors’ interests
The directors who held office at 31 March 2023 had the following interests, including any interests of a “connected person”, in the 1p
ordinary shares of ZOO Digital Group plc:

Page 59

Name of director

Gillian Wilmot

Dr Stuart A Green

Phillip Blundell

Gordon Doran

Mickey Kalifa

2023

2022

Beneficial

31,517

11,458,972

11,308,972

80,000

156,033

50,000

80,000

6,033

50,000

Shares are held on behalf of two of the directors in the long-term incentive plan.

On 7 July 2022, Dr Stuart Green and Gordon Doran exercised share options totalling 150,000 each into new ordinary shares at an exercise
price of 15p.

No other transactions have taken place with directors.

No changes (other than noted above) took place in the interests of directors between 31 March 2022 and 9 August 2023.

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 2023, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity,
the Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Cash
Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation of the group financial statements is applicable law and UK-adopted
international accounting standards. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting
Standard 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Policies).

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 2023 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 United Kingdom Generally
Accepted Accounting Practice; and

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.

Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis
of accounting included:

In responding to the key audit matter, we performed the following audit procedures:

•

obtaining an understanding of, and evaluating the design and implementation of relevant controls with respect to, management’s
going concern assessment;

obtaining management’s assessment, including management’s base case and reverse stress scenarios covering the period to 31
March 2025 and agreeing the mathematical accuracy of management’s models;

assessing the accuracy of management’s past forecasting by comparing management’s forecasts for the last two financial years to
the actual results for those years and considering the impact on the cash flow forecasts;

evaluating the key assumptions made within the cash flow forecasts, which included evaluating the quantum and timing of
cash outflows and inflows and determining whether these had been applied appropriately. We also considered whether these
assumptions were consistent with our understanding of the business and current external economic pressures;

evaluating management’s reverse stress test analysis over the forecast period, considering the impact of changing key
assumptions and obtaining an understanding of how these could break the forecast, and assessing the likelihood of such a
situation occurring;

obtaining post year end results achieved and comparing them to the forecast to determine whether the business is trading in line
with forecast; and

assessing the adequacy of the going concern disclosures included within the financial statements.

Annual Report 2023ZOO Digital Group plcPage 61

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 high inflation levels, 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.

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.

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.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.

Our approach to the audit

Materiality

Key audit

matters

Scoping

Overview of our audit approach for the Group

Overall materiality:
Group: $677,000, which represents approximately 0.75% of the Group’s revenue.
Parent company: $398,000, which represents approximately 1.0% of the parent company’s
total assets, capped at its component materiality for group audit purposes.

Key audit matters were identified as:

•

Improper revenue recognition (same as previous year).

Our auditor’s report for the year ended 31 March 2022 included going concern as a key audit
matter that has not been reported as a key audit matter in our current year’s report due to
the profitability achieved in the current year and the forecasted headroom throughout the
going concern assessment period.

Scoping was determined to ensure appropriate coverage of the significant risks as well as
coverage of the key results in the financial statements.

An audit of the financial information of the UK component was performed using
component materiality. A combination of full scope audits and analytical procedures at
Group level (analytical procedures) were performed on the other components.

95% of the Group’s revenue, 90% of the Group’s profit before tax and 92% of the Group’s
total assets balance were subject to full-scope audit 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

In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.

Annual Report 2023ZOO Digital Group plc Key audit matter Signiﬁcant riskOther riskHigh Low Potential ﬁnancial statement impactHigh Low Extent of management judgment Management override of controls Accuracy of staff costs Accuracy of the share-based payment charge Existence and valuation of trade receivables and contract assets Improper revenue recognition Going concern Impairment of goodwill and intangible assets Accuracy of capitalised developments costs Existence of cash Valuation of intangibles arising on acquisition Completeness and accuracy of trade creditors and accruals
Page 63

Key Audit Matter – Group

Improper revenue recognition

We identified improper revenue recognition as one of the most
significant assessed risks of material misstatement due to fraud.

Revenue is the most significant item in the consolidated statement
of comprehensive income ($90 million) and impacts a number of
key performance indicators, and key strategic decisions set out in
the annual report.

Licence and service 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’. Revenue is
recognised on an “output method” through assessing the progress
towards satisfying the performance obligation. There is judgement
in determining this for open projects at year-end. There is a
significant risk that management may record revenue fictitiously or
in advance of the criteria for revenue recognition being satisfied.

How our scope addressed the matter – Group

•

In responding to the key audit matter, we performed the
following audit procedures:

• Documenting and assessing the design and

implementation of controls for the recording of revenue ;

• Using data analytic procedures to interrogate and test

the revenue population, including the analysis of revenue
postings from inception to cash, and substantively testing
a sample of manual entries. We tested the operating
effectiveness of controls over the bank reconciliation
process to support this testing;

• Assessing revenue recognition policies, including

comparing accounting policies to IFRS 15 requirements;

•

Performing substantive testing across material revenue
streams by agreeing a sample of transactions to
supporting documentation and vouching that income has
been appropriately recognised; and

• Obtaining and testing management’s revenue recognition

calculations by recalculating a sample of contracts that are
in progress towards satisfying the performance obligation
and comparing to the amounts recorded by the Group.

Relevant disclosures in the Annual Report 2023

Key observations

Financial statements: Note 2.12, Summary of significant accounting
policies

Financial statements: Note 5, Revenue

Financial statements: Note 27, Contracts with customers

Based on our audit work, we did not identify any material
misstatement or fraudulent transactions in the revenue recognised
in the year to 31 March 2023.

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

$677,000, which is approximately
0.75% of the Group’s revenue.

$398,000, which is approximately 1% of the parent company’s
total assets, capped at its component materiality for group audit
purposes.

Significant judgements
made by auditor in
determining 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 the Group;

•

Revenue is a more stable
measure year on year than profit
or loss before tax; and

Total assets is considered the most appropriate performance
measure to the stakeholders of the parent company based
on there being no trade through the parent company with the
parent company acting 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 company as a component within a listed entity Group.

Materiality for the current year is higher than the level that we
determined for the year ended 31 March 2022 to reflect the
improvement in the Group’s financial performance and the increase
in the parent company’s total assets at the year end.

• We determined a percentage
of 0.75% to be appropriate
based on the parent company
being listed on AIM and the
performance of the Group in the
year being strong.

• Materiality for the current

year is higher than the level
that we determined for the
year ended 31 March 2022 to
reflect the improvement in
the performance of the Group
during the year, which has led
to the Group’s financial position
also strengthening and the
increase in the Group’s revenue.

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

$474,000, which is 70% of financial
statement materiality.

$260,000, which is 70% of financial statement materiality.

Significant judgements
made by auditor
in determining
performance materiality

Specific materiality

In determining performance
materiality, we made the following
significant judgements:

•

The strength of the control
environment based on our
assessment of the design and
implementation of controls; and

The effect of misstatements
identified in previous audits.

In determining performance materiality, we made the following
significant judgements:

•

The strength of the control environment based on our
assessment of the design and implementation of controls; and

The effect of misstatements identified in previous audits.

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.

We determined a lower level of
specific materiality for the following
areas:

• Directors’ remuneration; and

•

Related party transactions
outside of the normal course of
business.

We determined a lower level of specific materiality for the following
areas:

• Directors’ remuneration; and

•

Related party transactions outside of the normal course of
business.

Annual Report 2023ZOO Digital Group plcPage 65

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.

$38,000 and misstatements below
that threshold that, in our view,
warrant reporting on qualitative
grounds.

$20,000 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.

Overall materiality – Group

Overall materiality – Parent company

Revenue
$90.3m

PM
$474,000
70%

FSM
$677,000
0.75%

TFPUM
$203,000
30%

Total assets
$63.5m

PM
$260,000
70%

FSM
$398,000
1%, capped
at its
component
materiality

TFPUM
$138,000
30%

FSM: Annual Report materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatement

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

• We obtained an understanding of the group and its environment, including group-wide and component specific controls, and

assessed the risks of material misstatement at the group level. We held planning discussions with the Group’s management team;
and

• We performed inquiries and observations on key areas of focus including revenue, going concern, impairment, employee

remuneration and cash, to understand the controls.

Identifying significant components

• We evaluated the identified components to assess their significance and determined the planned audit response based on
a measure of materiality. Significance was determined by reference to each component’s contribution to the Group’s total
revenue, profit before tax and total assets as well as considering qualitative factors, such as a component’s specific nature or
circumstances.

Type of work to be performed on financial information of parent and other components (including how it addressed the
key audit matters)

• We performed a full-scope audit of the financial information of three components, using component materiality. These

procedures included a combination of tests of details and analytical procedures. Our procedures to address our key audit matter
in respect of revenue recognition were performed at a component level.

•

For the five components that were not individually significant to the Group, we carried out analytical procedures.

Performance of our audit

• All audit procedures to support the Group audit opinion were performed by the Group engagement team.

• Our audit procedures were performed by a combination of remote and in person auditing. We attended the parent company’s

primary location in Sheffield to perform audit procedures.

• We performed the full-scope audits and analytical procedures across the components in line with the scope described.

Communications with component auditors

•

There were no component auditors involved in the Group audit. All audit work was performed by the Group engagement team.

Audit approach

Full-scope audit

Analytical procedures

No. of
components

% coverage
total assets

% coverage revenue

% coverage PBT

Other information
The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information contained within the Annual Report. 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.

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 themselves. 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 their 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
As explained more fully in the Directors’ responsibilities statement set out on page 53, 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable
of detecting irregularities, including fraud, is detailed below:

Annual Report 2023ZOO Digital Group plcPage 67

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and the parent company,
and the industry in which they operate. We determined that the most significant are the Companies Act 2006 and UK-adopted
international accounting standards and, as regards the parent company financial statements, as applied in accordance with the
provisions of Companies Act 2006, and relevant tax regulations.

• We obtained an understanding of the UK and US legal and regulatory framework applicable to the Group and the parent

company by discussing relevant frameworks with group management and component management, and corroborated our
inquiries through a review of board minutes and papers provided to the Audit Committee.

• We enquired of management whether there were any circumstances of non-compliance with laws and regulations or whether

they had any knowledge of actual or suspected fraud. We corroborated the results of our enquiries to supporting documentation
such as board minutes and papers provided to the Audit Committee.

•

To assess the potential risks of misstatement, we obtained an understanding of:

— the Group’s operations including the nature of its revenue sources, expected financial statement disclosures and business

risks that may result in risk of material misstatement; and

— the Group’s control environment including the adequacy of procedures for authorisations and transactions.

• We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur by meeting
with management from different parts of the business to understand where it is considered there was a susceptibility of fraud.
We also considered performance targets and their propensity to influence efforts made by management to manage earnings. We
considered the programs and controls that the group has established to address risks identified, or that otherwise prevent, deter
and detect fraud; and how senior management monitors those programs and controls;

• Audit procedures performed by the engagement team included:

— evaluating the processes and controls established to address the risks related to irregularities and fraud;

— testing manual journal entries, in particular, journal entries relating to management estimates such as the provision for trade

receivables, and journal entries determined to have a large impact on profit or relating to unusual transactions. In addition, we
performed primary testing to identify journals posted by senior finance personnel and material credits to costs;

— challenging the assumptions and judgements made by management in its significant accounting estimates, including the

suitability of the discount rate used by management in its impairment testing; and

•

identifying and testing related party transactions.

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.

•

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 the parent company operate; and

— understanding of the legal and regulatory requirements specific to the Group and the parent company.

•

Team communications in respect of potential non-compliance with laws and regulations and fraud included the potential
for fraud in revenue through manipulation of the revenue recognised on contracts that were open at the year end. 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.

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.

Victoria McLoughlin
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds

9 August 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2023

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

Share of profit of associates and JVs

Finance income

Exchange gain/(loss) on borrowings

Fair value movement on embedded derivative

Finance cost

Total finance costs

Profit/(loss) before taxation

Tax credit

Profit and total comprehensive income for the year attributable to equity
holders of the parent

Profit per share

basic

diluted

*see note 34 for details regarding the prior period restatement.

Note

2023

$000

90,260

(56,327)

33,933

(25,860)

8,081

15,466

(1,650)

(3,973)

(1,762)

8,081

146

247

(620)

(365)

7,862

370

8,232

Restated*
2022

$000

70,403

(49,562)

20,841

204

(19,165)

1,880

7,060

(513)

(3,008)

(1,659)

1,880

(5)

(1,567)

(519)

(2,091)

(211)

1,573

1,362

9.30 cents

8.30 cents

1.60 cents

1.50 cents

The notes on pages 74 to 112 are an integral part of these consolidated financial statements.

Annual Report 2023ZOO Digital Group plcCONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2023

ASSETS

Non-current assets

Intangible assets

Property, plant and equipment

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

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

Converted loan note reserve

Share option reserve

Capital redemption reserve

Interest in own shares

Other reserves

Accumulated losses

Attributable to equity holders

*see note 34 for details regarding the prior period restatement.

Note

2023

$000

10,341

14,736

4,300

1,664

31,041

16,532

4,836

11,839

33,207

64,248

(19,746)

(693)

(1,408)

(21,847)

(6,968)

(300)

(7,268)

(29,115)

35,133

1,179

55,797

(992)

4,391

6,753

(49)

12,320

(44,266)

35,133

Page 69

Restated* 2022

$000

9,870

13,317

4,154

1,490

28,831

22,972

3,647

5,962

32,581

61,412

(25,884)

(774)

(1,313)

(27,971)

(7,830)

(619)

(8,449)

(36,420)

24,992

1,174

55,665

(992)

5,471

2,619

6,753

(49)

12,320

(57,969)

24,992

The notes on pages 74 to 112 are an integral part of these consolidated financial statements.

The financial statements on pages 68 to 112 were approved and authorised for issue by the board of directors on 9 August 2023
and were signed on its behalf.

Stuart A Green
Chief Executive Officer

Phillip Blundell
Chief Finance Officer

COMPANY STATEMENT OF FINANCIAL POSITION
as at 31 March 2023

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

Current liabilities

Trade and other payables

Borrowings

Net current assets

Non-current liabilities

Borrowings

Other payables

Net assets

EQUITY

Called up share capital

Share premium reserve

Foreign exchange translation reserve

Converted loan note reserve

Share option reserve

Capital redemption reserve

Interest in own shares

Other reserves

Accumulated losses

Total equity

Company registration number: 03858881

Note

2023

$000

4,342

2,291

4,198

13,449

38,546

62,826

665

672

(20,369)

(9,892)

(30,261)

33,237

(2,178)

(300)

(2,478)

30,759

1,179

55,797

(13)

4,391

6,753

(4)

10,596

(47,940)

30,759

2022

$000

4,336

2,281

4,052

12,700

26,095

49,464

480

510

(9,314)

(9,795)

(19,109)

30,865

(2,527)

(600)

(3,127)

27,738

1,174

55,665

(13)

5,471

2,619

6,753

(4)

10,596

(54,523)

27,738

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 profit for the parent company for the year was $1,112,000 (2022: loss of $667,000).

The notes on pages 74 to 112 are an integral part of these consolidated financial statements.

The financial statements on pages 68 to 112 were approved and authorised for issue by the board of directors on 9 August 2023
and were signed on its behalf.

Stuart A Green

Phillip Blundell

Chief Executive Officer

Chief Finance Officer

Annual Report 2023ZOO Digital Group plc

Page 71

Total
equity
attributa-
ble to the
owners of
the Parent

$000

2,839

20,255

513

20,789

(3)

1,362

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2023

Share
premium

reserve

Ordinary
shares

$000

1,010

164

$000

41,003

14,662

Balance at 1 April 2021

Issue of Share Capital

Share options exercised

Share based payments

Transactions with owners

164

14,662

Foreign
exchange
trans-
lation
reserve

$000

(997)

Convert-
ed loan
note
reserve

Share
option
reserve

$000

5,429

$000

2,085

513

534

Capital
redemp-
tion
reserve

$000

6,753

Other
reserves

$000

12,320

Accu-
mulated
losses

$000

(59,331)

Interest
in own
shares

$000

(46)

1,362

1,174

55,665

(992)

5,471

2,619

6,753

12,320

(57,969)

(49)

24,992

1,174

55,665

(992)

5,471

2,619

6,753

12,320

(56,703)

(49)

26,258

Prior period adjustment *

(1,266)

1,174

55,665

(992)

5,471

2,619

6,753

12,320

(57,969)

(49)

24,992

132

(5,471)

122

1,650

1,772

5,471

8,232

4,391

6,753

12,320

(44,266)

(49)

254

1,650

2,672

8,232

35,133

Balance at 31 March 2023

1,179

55,797

(992)

*see note 34 for details regarding the prior period restatement.

Foreign exchange transla-
tion adjustment

Profit for the year
(restated*)

Total comprehensive
income for the year
(restated*)

Balance at 31 March 2022
(restated*)

Balance at 31 March
2022 as originally pre-
sented

After restated total eq-
uity as at 31 March 2022

Issue of Share Capital

Share options exercised

Share based payments

Transfer of converted loan
note reserve

Transactions with owners

Foreign exchange transla-
tion adjustment

Profit for the year

Total comprehensive
income for the year

COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2023

Share
premium
reserve

Foreign
exchange
translation
reserve

Convert-
ed loan
note
reserve

Ordinary
shares

Share
option
reserve

Capital re-
demption
reserve

Other
reserves

Accu-
mulated
losses

Interest
in own
shares

$000

1,010

164

41,003

14,662

164

14,662

(13)

5,429

2,085

6,753

10,596

(53,856)

(4)

513

534

(667)

Total

$000

7,616

20,255

513

20,789

(667)

1,174

55,665

(13)

5,471

2,619

6,753

10,596

(54,523)

(4)

27,738

132

1,179

55,797

(13)

(5,471)

122

1,650

1,772

5,471

1,112

254

1,650

1,909

1,112

4,391

6,753

10,596

(47,940)

(4)

30,759

Restated balance at 1
April 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

Issue of share capital

Share options exercised

Share based payments

Transfer of converted
loan note reserve

Transactions with
owners

Profit for the year

Total comprehensive
income for the year

Balance at 31 March
2023

Annual Report 2023ZOO Digital Group plcCONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2023

Cash flows from operating activities

Operating profit for the year

Other income

Depreciation and impairment

Amortisation and impairment

Share based payments

Changes in working capital:

Increases in trade and other receivables

(Decrease)/Increase 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

Payment of deferred consideration

Net cash outflow from investing activities

Cash flows from financing activities

Repayment of 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 (outflow)/inflow from financing

Net 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

*see note 34 for details regarding the prior period restatement.
The notes on pages 74 to 112 are an integral part of these consolidated financial statements.

Note

15, 20

Page 73

Restated*
2022

$000

1,880

3,022

1,659

513

(15,433)

13,583

5,224

258

5,482

(58)

(1,675)

(953)

(3,000)

(4,377)

(300)

(10,363)

(231)

10,107

(1,268)

(348)

(551)

164

7,894

3,013

2,949

5,962

2023

$000

8,081

3,973

1,762

1,650

5,251

(5,219)

15,506

196

15,702

(60)

(2,163)

(4,706)

(1,300)

(8,229)

(477)

(748)

(630)

254

(1,596)

5,877

5,962

11,839

NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2023

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 the UK, US and India.

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). Monetary amounts in these financial statements are rounded to the nearest $000.

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

Group financial statements

These financial statements have been prepared in accordance with UK adopted international accounting standards and the
requirements of the Companies Act 2006.

The preparation of financial statements in accordance with international accounting standards and 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.

Parent Company financial statements

The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (“FRS 101”) and in accordance with applicable accounting standards

In the current reporting period the Company has adopted FRS 101 for the first time. FRS 101 is a reduced disclosure framework of
IFRS, and accordingly there have been no transitional adjustments to disclose on adoption of FRS 101.

As permitted by FRS 101, the Company has taken advantage of the following disclosure exemptions from the requirements of
IFRS:

•

inclusion of an explicit and unreserved statement of compliance with IFRS;

presentation of a statement of cash flows and related notes;

disclosure of the objectives, policies and processes for managing capital;

disclosure of key management personnel compensation;

disclosure of the categories of financial instrument and the nature and extent of risks arising on these financial instruments;

the effect of financial instruments on the statement of comprehensive income;

comparative period reconciliations for the number of shares outstanding and the carrying amounts of property, plant and
equipment, intangible assets, investment property and biological assets;

a reconciliation of the number and weighted average exercise prices of share options, how the fair value of share-based
payments was determined and their effect on profit or loss and the financial position;

comparative narrative information;

for financial instruments, investment property and biological assets measured at fair value and within the scope of IFRS
13, the valuation techniques and inputs used to measure fair value, the effect of fair value measurements with significant
unobservable inputs on the result for the period and the impact of credit risk on the fair value; and

related party disclosures for transactions with the parent or wholly owned members of the Group.

The Company applies accounting policies, key judgements, and key estimates on a consistent basis as the Group, except for
disclosure exemptions set out above. To the extent that an accounting policy is relevant to both Group and Parent Company
financial statements, the Group accounting policy disclosed below provides details of the accounting policy insofar as this is
relevant to the Company.

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.

Going concern

The directors have prepared trading and cash flow forecasts for the group for the period to 31 March 2025 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

Annual Report 2023ZOO Digital Group plcPage 75

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 June 2024.

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 2022
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 2023 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. However, such fair values
and all associated accounting entries are subject to revision during a period not exceeding 12 months following the date of
acquisition, insofar as the accounting for the business combination is incomplete by the end of the first reporting period date. As
a result, ZOO Digital Group plc revises any provisional amounts retrospectively to reflect further evidence received in respect of
acquisition date values. Details of these revisions are provided in note 18.

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. The segments are described further in note 4.

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 2023 was 0.813 (2022: 0.762).

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.

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 cost less accumulated amortisation and impairment losses. Amortisation is
charged to profit or loss on a straight-line basis over its estimated useful life of three years from the date the asset is
available for use.

Costs that are directly associated with the development of identifiable and unique software products controlled by the
group, and are expected to generate economic benefits exceeding costs beyond one year, are recognised as development
costs within intangible assets. See note 2.5.3 Research and Development costs.

2.6 Investments in subsidiary undertakings

In the company, investments in subsidiary undertakings are carried at cost less any impairment. The investments are reviewed on
an annual basis for any indication of impairment. The investments are eliminated on consolidation.

2.6.1 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

Annual Report 2023ZOO Digital Group plcZOO Digital Group plc
Annual Report 2023

Page 77

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

5 years or over the term of the lease, if shorter

— Computer hardware

between 2 and 3 years

— Office equipment, fixtures and fittings

between 2 and 5 years

— Production equipment

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 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 a forward-looking information to recognise expected credit losses – the
“expected credit loss (ECL) model”. Instruments within the scope of IFRS 9 included loans and other debt-type financial
assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15
and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through
profit and loss.

Recognition of credit losses is no longer dependent on the group first identifying a credit loss event. Instead the group
considers a broader range of information when assessing credit risk and measuring expected credit losses, including past
events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash
flows of the instrument.

In applying this forward-looking approach, a distinction is made between:

•

financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low
credit risk (Stage 1”) and

financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk
is not low (“Stage 2”).

“Stage 3” would cover financial assets that have objective evidence of impairment at the reporting date.

“12-month expected credit losses” are recognised for the first category while “lifetime expected credit losses” are
recognised for the second category.

Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the
expected life of the financial instrument.

2.9.3 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and 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:

Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied.

Revenue is measured at transaction price, stated net of VAT and other sales related taxes.

Revenue is recognised over time as the group satisfies performance obligations by transferring the promised services to its
customers.

Costs are recognised when the liability transfers to ZOO, which is determined by work being completed.

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 value to the customer and typically this is over one to four
months. Where a project goes over a month end, projects completed but not invoiced are accrued. At year end projects
that have not completed are assessed for the value to the customer of services transferred to date and a contract asset is

Annual Report 2023ZOO Digital Group plcZOO Digital Group plc
Annual Report 2023

Page 79

recognised if appropriate.

The major consideration for ZOO is the timing of revenue recognition. The board believes that the length of projects is
short and that the current method of recognising revenues is appropriate.

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 entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.
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 still ongoing at the end of an accounting period, the asset enhancement completed to date is estimated
based on reports within ZOO core and ZOO invoicing which use the project status and the customer ratecard to
determine revenue to date. This allows revenue 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. All costs relating to complete or partially complete performance are expensed as incurred. 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.

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-
use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred
by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made
in advance of the lease commencement date (net of any incentive received).

The Group depreciates the right-of-use assets on a straight line basis from the lease commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for
impairment when such indicators exist.

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that
date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing
rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed),
variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments
arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is removed to
reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if
the right-of-use asset is already reduced to zero.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of

recognising a right-of-use asset and lease liability, the payments in relation to those are recognised as an expense in profit or loss
on a straight-line basis over the lease term.

On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease
liabilities have been included in borrowings.

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.

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 17) 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 16% (2022:10%). No impairment loss is incurred at this discount rate. No reasonable adjustment to the discount rate or
other inputs would result in an 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, in accordance with the
requirements of IAS 12 ‘Income Taxes’.

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.

Intangible non-current assets
These are estimated on the basis of value in use, which is calculated from the present value of future cash flows expected to
be derived from the asset under review. The key elements of estimation are the calculation of future cash flows. For intangible
assets, future cash flows are forecast revenues from the associated cash-generating unit. Further estimation is made in
determining an appropriate discount rate that reflects the specific risks associated with the asset or cash-generating unit. See
note 17 for further details of assumptions made and sensitivity testing regarding intangible assets.

Annual Report 2023ZOO Digital Group plcZOO Digital Group plc
Annual Report 2023

Page 81

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
has 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.

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. The allocation of such a price is done using the output method, reflecting that
ZOO’s delivery is to deliver services to enhance the customer’s assets.

Intercompany non-current asset classification (parent company only)
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 its subsidiaries to repay its debts to the Group in the next 12 months.

Recognition of revenue from multiple element contracts, and revenue recognition
Management uses judgement in determining the fair value of multiple element contracts in order to appropriately recognise
the revenue attributable to each element, which may be based on contractual terms or (for bundled contracts) the standalone
selling price that would be attributed to each service.

For revenues recognised over time, the value of revenue recognised in the period is dependent on an assessment of work to the
reporting period end date. (see 2.12.1).

Capitalisation of development costs
The capitalisation of development expenditure is dependent on the costs meeting the recognition criteria in accordance with
IAS 38 ‘Intangible Assets’. In assessing the criteria, management makes judgements on the level of future economic benefits of
the asset flowing to the Company. Management is assisted in making these judgements through the monitoring both of sales
forecasts and of the level of future cost benefits arising.

4. Segmental reporting

Operating segments
At 31 March 2023, 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.

The segment profit reported to the Group’s Chief Operating Decision Maker (“CODM”) is to a segment contribution level only, which
is to the extent required for the purpose of resource allocation and assessment of segment performance. Thus, a further analysis is
not provided nor arbitrarily allocated on the basis that the CODM does not use this information. Similarly, assets and liabilities of the
Group are not reported to the CODM by segment.

The segment results are as follows:

Media Production

Localisation

Media services

Software solutions

Total

2023

$000

65,911

(9,333)

56,578

18,853

Restated
2022

$000

49,573

(7,387)

42,186

8,756

2023

$000

38,297

(6,182)

32,115

19,547

Restated
2022

$000

26,425

14,481

2023

$000

1,567

1,316

Restated
2022

$000

1,792

2023

$000

105,775

(15,515)

1,792

1,660

90,260

39,716

(5,783)

33,933

Restated
2022

$000

77,790

(7,387)

70,403

24,897

(4,056)

20,841

(25,852)

(18,961)

8,081

1,880

(373)

(2,091)

146

7,862

370

8,232

(211)

1,573

1,362

Total revenue

Inter-segment revenue

Revenue

Segment contribution

Unallocated cost of sales

Gross profit

Unallocated corporate expense and
income

Operating profit

Finance income

Finance cost

Profit share of profits of associates
and JVs

Profit/(loss) before taxation

Tax on profit

Profit for the year

Geographical areas
The group’s operating divisions operate in three principal geographical areas of the world, the UK, the US, and India. All European
operations are run from the UK office.

United Kingdom (domicile)

India

Revenue

Total assets

Non-current assets

2023

$000

16,990

2,052

71,218

90,260

2022

$000

9,179

61,224

70,403

2023

$000

27,080

3,710

33,458

64,248

Restated
2022

$000

31,476

29,936

61,412

2023

$000

19,677

1,644

9,720

31,041

2022

$000

26,083

2,748

28,831

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

Page 83

At 31 March 2023, contract assets amounted to $4.8m (2022: $3.6m) and contract liabilities amounted to $0.7m (2022: $0.8m). Revenue
for the year ended 31 March 2023 includes $0.5m (2022: $0.5m) included in the contract liability balance at the beginning of the
period. Further information on the values of contract assets and liabilities is provided in note 27.

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 (recognised over time)

Licence revenue (recognised over time)

The group’s revenue disaggregated by primary geographical markets is as follows:

United Kingdom

USA

Europe

Singapore

Other countries

United Kingdom

USA

Europe

Singapore

Other countries

2023

$000

88,693

1,567

90,260

For the year ended 31 March 2023

Service

Licensing

$’000

10,261

70,438

288

4,621

3,085

88,693

$’000

1,558

1,567

For the year ended 31 March 2022

Service

Licensing

$’000

3,937

62,838

764

165

907

68,611

$’000

1,735

2022

$000

68,611

1,792

70,403

Total

$’000

10,270

71,996

288

4,621

3,085

90,260

Total

$’000

3,986

64,573

764

165

915

1,792

70,403

The group’s revenue disaggregated by pattern of revenue recognition is as follows:

Services transferred over time

For the year ended 31 March 2023

Service

$’000

88,693

Licensing

$’000

1,567

For the year ended 31 March 2022

Service

Licensing

$’000

68,611

$’000

1,792

Total

$’000

90,260

Total

$’000

70,403

Major clients
The group has two major customers contributing 74% and 4% (2022: 78% and 6%) of the group’s revenue respectively. The debtor
receivable balance as at 31 March 2023 for the two largest clients was $9m (2022: $18m). The revenues are as follows:

Largest two clients

Other clients

6. Other operating income

Grant Funding (Sheffield City Council and Innovate UK)

Investment income

Other operating income

7. Finance income and costs

Interest received

Finance costs

Interest on borrowings

Interest on lease liabilities

Fair value movement on embedded derivative

Exchange loss on borrowings

Finance costs

2023

$000

70,669

19,591

90,260

2022

$000

58,905

11,498

70,403

2023

$’000

2023

$’000

591

620

(247)

373

2022

$’000

204

2022

$’000

288

231

519

1,567

2,091

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 (CLN) agreement which have been classed as embedded derivatives. The CLN was converted in
September 2021 and this now no longer exists.

8. Operating profit

Group operating profit/loss for the year is stated after charging/(crediting) the following:

Other exchange losses/(gains)

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

2023

$000

12,439

(2,163)

1,650

3,973

1,762

602

212

7,334

25,860

2022

$000

(98)

9,973

(1,675)

513

2,411

611

(14)

1,659

278

129

5,378

19,165

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

9. Auditor’s remuneration

Fees payable to the company’s auditor for the audit of the company’s financial statements

For audit services:

Fees payable to the company’s auditor and its associates for other services:

The audit of subsidiary financial statements

For other services:

Audit-related assurance services

10. Employees including directors

The average number of employees (including executive directors) was:

Product design and service delivery

Sales and marketing

Administration

Their aggregate remuneration comprised:

Wages and salaries

Social security costs

Other pension costs

Share based payments

Group

2023

No.

499

558

2022

No.

320

353

Group

Company

2023

$’000

31,031

2,030

444

1,650

35,155

2022

$000

24,462

2,257

259

513

27,491

2023

$’000

3,684

287

118

268

4,357

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 44 - 46 and senior management.

Group

2023

$000

2,426

280

2,716

Page 85

2022

$000

104

129

2023

$000

194

212

Company

2023

2022

No.

150

177

No.

110

130

2022

$000

3,560

226

130

371

4,287

2022

$’000

2,452

120

2,583

Directors’ remuneration for the year to 31 March 2023 is:

Dr Stuart A Green

Gordon Doran

Phillip Blundell

Mickey Kalifa

Gillian Wilmot

Nathalie Schwartz

Salary

$000

291

414

235

Bonus

$000

292

340

146

1,103

778

Benefits

Pension

$000

2023

Total

$000

591

781

381

1,918

2022

Total

$000

615

726

456

1,931

Three directors (2022: 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. Alternative Performance Measures

2023

$000

781

2022

$000

726

The Directors have used a number of Alternative Performance Measures (“APM”) in the preparation of these financial statements.
The Consolidated Statement of Comprehensive Income has presented ‘Earnings before Interest, Tax, Depreciation and Amortisation’
(“EBITDA”) before share-based payments, which removes the non-cash aspect of employee remuneration which is, in the opinion of
the Directors, not relevant to the underlying performance and cash generation of the business.

The Directors have presented this APM because they feel it most suitably represents the underlying performance and cash
generation of the business, and allows comparability between the current and comparative period in light of the changes in the
business, and will allow an ongoing trend analysis of this performance based on plans for the business.

The Consolidated Statement of Comprehensive Income provides a reconciliation of EBITDA before share-based payments to
operating profit, which is presented within the boxed section. This reconciliation is relevant throughout this annual report when
“EBITDA before share-based payments” or “adjusted EBITDA” is stated.

12. Income tax

Current tax:

UK corporation tax

- Research and development tax credit

Foreign tax

Adjustments in respect of prior periods (foreign tax)

Total current tax

Total deferred tax – Origination and reversal of timing differences

Tax credited

Corporation tax is calculated at 19% (2022: 19%) of the estimated assessable profit for the year.

2023

$000

(446)

112

142

(192)

(178)

(370)

2022

$000

(410)

152

(258)

(1,315)

(1,573)

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

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% (2022: 19%)

Disallowable expenses

Research and development tax credit (see below)

Foreign tax

Deferred tax asset initially recognised

Other movements

(Deducted from)/accumulation of unrecognised losses brought forward

Tax credited

*see note 34 for details regarding the restatement as a result of an error.

Page 87

2023

Restated* 2022

$000

7,862

1,494

(446)

770

(144)

142

(2,245)

(370)

$000

(211)

(40)

(410)

152

(1,315)

(1,573)

Companies within the Group are entitled to claim special tax deductions for investments in qualifying assets or in relation to
qualifying expenditure under the Research and Development Tax Incentive regime. The Group accounts for these allowances as tax
credits, which means that the allowance reduces income tax payable and current tax expense.

The UK corporation tax rate was 19% throughout the year.

In the March 2021 Budget, a change to the future UK corporation tax rate was announced, meaning that the rate will increase to 25%
from April 2023. Full details of the impact of this and other overseas rates are provided in note 20.

Tax losses carried forward
The group has tax losses carried forward of approximately $31.5m (2022: $38.1m), of which $1.9m (2022: $2.6m) 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. Further analysis is provided in note 20.

13. Dividends

There were no dividends paid or proposed.

14. Earnings per share

Basic earnings per share (“EPS”) 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.

Diluted EPS is calculated by dividing the profit attributable to the equity holders of the Parent by the weighted average number of
ordinary shares outstanding plus the weighted average number of shares that would be issued on conversion of all the dilutive share
options into ordinary shares.

Profit for the financial year

Weighted average number of shares for basic & diluted profit per share

Basic

Effect of dilutive potential ordinary shares:

Share options

Diluted

Basic

Diluted

Basic and Diluted

2023

Restated 2022

$000

8,232

$000

1,362

2023
Number of
shares

2022
Number of
shares

88,835,890

85,037,636

10,451,983

8,585,215

99,287,873

93,622,851

2023

Restated 2022

Cents

9.30

8.30

1.60

1.50

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

15. Property, plant and equipment

Group

Cost

Opening cost at 1 April 2021

Additions – Right of use assets

Additions - owned

On Vista acquisition

Disposals – Right of use assets

Opening cost at 1 April 2022

Additions – Right of use assets

Additions - owned

Disposals – owned

Closing cost at 31 March 2023

Accumulated depreciation

Opening balance at 1 April 2021

Depreciation

Impairment

On disposal

Opening balance at 1 April 2022

Depreciation

Impairment

On disposal

Closing balance at 31 March 2023

Opening carrying value at 1 April 2022

Closing carrying value at 31 March 2023

Production
equipment

Leasehold
property
improvements

Computer
hardware

Office
equipment,
fixtures &
fittings

$000

843

937

328

(503)

762

628

149

777

182

(503)

456

160

306

4,460

8,495

2,110

(3,034)

12,031

686

838

(545)

13,010

2,306

1,097

611

(2,042)

1,972

1,930

(545)

3,357

10,059

9,653

5,225

2,001

7,323

3,446

(2,404)

8,365

3,296

1,126

4,422

1,776

(2,404)

3,794

2,901

4,571

191

172

363

(108)

349

127

166

(108)

143

197

206

Page 89

Total

$000

10,719

8,495

4,377

(3,034)

20,654

686

4,706

(3,560)

22,486

6,357

2,411

611

(2,042)

7,337

3,973

(3,560)

7,750

13,317

14,736

Included in the net carrying amount of Leasehold Improvements are right-of-use assets of $7,311,000 (2022: $7,959,000). Details of
these leases are provided in note 16.

Company

Cost

Opening cost at 1 April 2022

Additions - owned

Disposals - owned

Closing cost at 31 March 2023

Accumulated depreciation

Opening balance at 1 April 2022

Depreciation

On disposals

Closing balance at 31 March 2023

Opening carrying value at 1 April 2022

Closing carrying value at 31 March 2023

Leasehold
improvements

Computer &
Production
hardware

Office
equipment,
fixtures &
fittings

$000

4,918

183

(307)

4,794

1,333

542

(307)

1,568

3,585

3,226

1,238

804

(166)

1,876

582

419

(166)

835

656

1,041

178

(73)

118

(73)

Total

$000

6,334

1,000

(546)

6,788

1,998

994

(546)

2,446

4,336

4,342

Included in the net carrying amount of leasehold improvements are right-of-use assets of $1,851,000 (2022: $2,041,000). Details of
these leases are provided in note 16.

16. Leases

Lease liabilities are presented in the statement of financial position as follows:

Current

Non-current

Group

Company

2023

$000

1,408

6,968

8,376

2022

$000

1,313

7,830

9,143

2023

$000

191

2,178

2,369

2022

$000

2,527

2,621

The Group has leases for offices in Sheffield, London, California, Chennai and Mumbai, and also for some 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 15).

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:

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

Page 91

No of
right-
of-use
assets

Range of re-
maining term

Average re-
maining lease
term

No of leas-
es with
extension
options

No of leases
with options
to purchase

No of leases
with variable
payments
linked to an
index

No of
leases
with ter-
mination
options

Right-of-use-asset

Office building

2-8.5 years

4 years

The lease liabilities are secured by the related underlying assets. Future minimum lease payments as at 31 March 2023 were as follows:

Within 1
year

$’000

1,941

(533)

1,408

1,868

(555)

1,313

31 March 2023

Lease payments

Finance charges

Net present values

31 March 2022

Lease payments

Finance charges

Net present values

1-2 years

2-3 years

3-4 years

4-5 years After 5 years

$’000

1,887

(436)

1,451

1,760

(458)

1,302

1,804

(331)

1,473

1,665

(382)

1,283

1,784

(220)

1,564

1,637

(284)

1,353

1,535

(109)

1,426

1,600

(197)

1,403

1,177

(123)

1,054

2,732

(243)

2,489

Total

$’000

10,128

(1,752)

8,376

11,262

(2,119)

9,143

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 $14,000 for leases of low value
assets. (2022: $12,000).

At 31 March 2023 the total commitment was $29,000 (2022: $20,000).

Total cash outflow for leases for the year ended 31 March 2023 was $1.9 million (2022 $1.9 million).

Group
Tangible assets for the group includes the following amounts where the company is a lessee:

At 31 March 2023

Cost - capitalised leases

Accumulated depreciation

Net book value

At 31 March 2022

Cost - capitalised leases

Accumulated depreciation

Production
equipment

Leasehold
improvements

Computer
hardware

$000

168

(140)

$000

9,864

(2,553)

7,311

$000

1,229

(1,083)

146

Production
equipment

Leasehold
improvements

Computer
hardware

$000

298

(215)

$000

9,547

(1,587)

$000

2,815

(2,377)

Office
equipment,
fixtures &
fittings

$000

Office
equipment,
fixtures &
fittings

$000

(26)

Total

$000

11,261

(3,776)

7,485

Total

$000

12,686

(4205)

Net book value

7,959

438

8,480

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 2023

Cost - capitalised leases

Accumulated depreciation

Net book value

At 31 March 2022

Cost - capitalised leases

Accumulated depreciation

Net book value

Leasehold
Improvements

Computer
hardware

$000

2,953

(1,102)

1,851

$000

Leasehold
Improvements

Computer
hardware

$000

3,229

(1,189)

2,040

$000

(20)

Total

$000

2,953

(1,102)

1,851

Total

$000

3,249

(1,209)

2,040

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

17. Intangible assets

Group

Cost

Page 93

Goodwill

$000

Customer
relationships

Development
costs

Patents and
trademarks

Computer
software

$000

Total

$000

Opening cost at 1 April 2021

Additions

On business combinations*

Opening cost at 1 April 2022 (as
restated)

Additions

Disposals

Exchange differences

16,610

1,548

18,158

1,424

13,583

1,675

15,258

2,163

Closing cost at 31 March 2023

18,168

1,424

17,421

Accumulated amortisation and impairments

Opening balance at 1 April 2021

Amortisation

Opening balance at 1 April 2022

Amortisation

Disposals

12,620

Closing balance at 31 March 2023

12,620

Opening carrying value at 1 April
2022 (as restated)

Closing carrying value at 31 March
2023

5,538

5,548

142

1,424

1,282

11,090

1,550

12,640

1,516

14,156

2,618

3,265

739

793

821

555

592

624

201

197

819

31,751

1,733

2,984

835

36,468

(598)

2,223

(598)

269

38,103

674

746

(598)

24,939

1,659

26,598

1,762

(598)

220

27,762

9,870

10,341

* Values have been retrospectively restated after adjustment of provisional fair values on business combination, following completion
of measurement period. Details of these adjustments are given in note 18.

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 (2022: nil).

No intangible assets were impaired during the year (2022: nil).

Company

Cost

Opening cost at 1 April 2022

Additions

Disposals

Closing cost at 31 March 2023

Accumulated amortisation/ impairment

Opening balance at 1 April 2022

Amortisation

Disposals

Closing balance at 31 March 2023

Opening carrying value at 1 April 2022

Closing carrying value at 31 March 2023

Goodwill

$000

Computer
software

$000

10,960

8,679

2,281

(10)

Total

$000

10,974

(10)

10,977

8,693

145

(10)

8,828

2,281

2,291

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 group of cash-generating assets to
which the goodwill attracted on acquisition. 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 16% (2021: 10%). The carrying amount of goodwill is allocated as follows:

Software solutions

Media production

Vista India

Group

2023
$000

2,281

2022
$000

2,281

2023
$000

1,733

2022
$000

1,709

2023
$000

1,548

2022
$000

1,548

2023
$000

5,562

2022
$000

5,538

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 and into perpetuity. 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

16%

India

25%

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 16% 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 16% 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 16% 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 20% was applied, the software solutions segment and
the media production segment would require no impairment.

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

Page 95

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. The pre-tax discount rate of 25% 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 25% was applied, the Vista segment would require no
impairment.

If sector growth assumption rates were applied at 0% and a discount rate of 25% was applied, the Vista segment would require no
impairment.

If sector growth assumption rates were applied at 0% and a discount rate of 30% was applied, the Vista segment would require no
impairment.

18. 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, collaboration, 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 has obtained expert help in identifying the intangible assets acquired and liabilities assumed based on their fair values.
In accordance with IFRS 3 para 45, this exercise is a movement from a provisional position.

The following table summarises the allocation of the acquisition of Vista India Digitek Private Limited and Vista Tanweer Studio
Private Limited.

Fair value of consideration

Acquired tangible net assets

Non-current assets

Working capital

Net (debt)/cash

Acquired net assets

Identified intangible assets

Customer relationships

Intangible assets

Deferred tax on customer relationships

Deferred tax on intangible assets

Fair value of net assets acquired

Residual goodwill

Revision of previously presented values

$000

168

235

(19)

384

1,424

(356)

$000

3,000

1,452

1,548

The Group has revised the accounting for this business combination, in accordance with IFRS 3.45, in respect of new information

received about the acquisition date fair values. The final position is shown above, which compares to previously adopted values as
follows:

Fair value of consideration

Split as:

Non-current assets

Working capital

Net debt

Customer relationships

Deferred tax

Goodwill

Per
provisional
acquisition
accounting

$000

3,000

168

235

(19)

2,616

Final fair
value
(as above)

$000

3,000

168

235

(19)

1,424

(356)

1,548

Revision

$000

1,424

(356)

(1,068)

These amendments have been recognised as a prior year adjustment, although due to the timing of the acquisition late in the prior
year no amortisation has been charged on the customer relationships and as such there is no impact on the Group’s reported results.

Following this amendment, the measurement period for this acquisition is complete and no further amendments will be recognised.

19. Investments

Parent company – shares in group undertakings

Cost

At 1 April 2022

Additions

At 31 March 2023

Amounts written off

At 1 April 2022 and 31 March 2023

Carrying amount

At 31 March 2023

At 31 March 2022

$000

14,797

749

15,546

(2,097)

13,449

12,700

The additions in the year related to a subscription for additional ordinary share capital in Vista India Digitek Private Limited.

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

Investments in joint ventures and associates
Group

Joint
ventures

$000

906

2023

Associates

$000

3,248

143

Total

$000

4,154

146

909

3,391

4,300

Joint
ventures

$000

906

2023

Associates

$000

3,146

143

909

3,289

Total

$000

4,052

146

4,198

At 1 April

Additions

Share of profits for the year

Dividends received

At 31 March

Company

At 1 April

Additions

Share of profits for the year

Dividends received

At 31 March

Page 97

Total

$000

4,154

Total

$000

4,052

2022

Joint
ventures

Associates

$000

906

$000

906

$000

3,248

$000

3,146

3,248

4,154

2022

Joint
ventures

Associates

3,146

4,052

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.

Class of share held

Proportion of nominal value held

Name

Ares Media

Whatsub Pro

Address of registered
office

Kireçburnu Mah.
Arabayolu Cad. No: 136
Sarıyer, Istanbul

B1, 78, Seongmisan-ro
Mapo-gu

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.

20. Deferred income tax

Deferred tax assets comprise:

Vista India Digitek

Vista Tanweer

Fixed asset timing differences

Business combinations

Unused tax losses

As at 31 March

The gross movement on the deferred income tax account is as follows:

At 31 March

On Vista acquisition

Charged to the statement of comprehensive income

At 31 March

Group

Company

2023

$000

(321)

1,911

1,664

Group

2023

$000

1,490

(4)

178

1,664

2022

$000

(832)

(356)

2,633

1,490

2022

$000

486

(311)

1,315

1,490

2023

$000

2022

$000

Company

2023

$000

2022

$000

Tax losses carried forward
The group has tax losses carried forward of approximately $31.5m (2022: $38.1m), of which $1.9m (2022: $2.6m) 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.

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

21. Trade and other receivables

Trade receivables

Less: allowance for impairment of trade receivables

Trade receivables - net

Amounts owed by subsidiary undertakings

VAT

Other debtors

Prepayments

Less non-current portion: amounts owed by subsidiary
undertakings

Current portion

Page 99

Group

Company

2023

$000

13,307

910

2,315

16,532

Restated 2022

$000

20,910

(29)

20,881

2023

$000

2022

$000

38,600

26,152

371

1,720

22,972

474

361

39,211

26,575

(38,546)

665

(26,095)

480

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 2023, trade receivables of ($203,000) (2022: $283,000) 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

2023

$000

415

240

(912)

(203)

2022

$000

354

(10)

(277)

(350)

(283)

There were no trade receivables outstanding in the company at 31 March 2023 that were overdue (31 March 2022: nil)

All of the group’s trade and other receivables have been reviewed for indicators of impairment. Trade receivables were found not to
be impaired (2022: Impairment $29,000).

Expected credit loss as a % of gross receivables.

Group

Expected credit loss %

Trade receivables

Expected credit loss

Current

1-3 months

3-6 months

0.1%

$’000

5,802

0.2%

$’000

6,685

0.5%

$’000

304

Over 6
months

$’000

516

The expected credit loss based on the above is not material and has therefore no provision has been made.

The carrying amounts of trade and other receivables are denominated in the following currencies:

Pound sterling

US Dollar

Hong Kong dollar

Japanese Yen

UAE dirham

Indian rupee

Euro

Allowance for impairment of trade receivables:

At 1 April 2022

Allowance for receivables impairment

Receivables written off in the year

At 31 March 2023

Group

Company

2023

$000

894

14,230

746

518

16,532

Restated 2022

$000

541

19,389

157

377

168

2,340

22,972

2023

$000

462

38,701

2022

$000

201

26,374

39,211

26,575

Group

2023

$000

(29)

2022

$000

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.

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 $5,392,000 (2022:
$12,969,000) of which $686,000 (2022: $8,495,000) was acquired by 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

2023

$000

11,839

2022

$000

5,962

2023

$000

2022

$000

The fair values of the cash and cash equivalents are considered to be their book value.

Annual Report 2023ZOO Digital Group plc

ZOO Digital Group plc
Annual Report 2023

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

$000

4,110

(464)

(3,526)

(120)

$000

528

(67)

(461)

$000

4,452

971

(5,423)

Long-term
borrowings

Short-term
borrowings

Embedded
derivative

Lease
liability

(1,453)

Page 101

Total

$000

9,143

686

8,376

Total

$000

11,243

(1,479)

971

(8,949)

8,495

(1,138)

9,143

2022

$000

1,174

$000

9,143

686

8,376

$’000

2,153

(948)

8,495

(557)

9,143

2023

$000

1,179

88,335,079

74,837,271

185,545

764,667

28,022

636,100

5,336,459

7,454,727

42,500

89,285,291

88,335,079

1 April 2022

Cash-flows

- Repayment

- Proceeds

Non-cash

- Fair value

- Converted

- Additions

- Reclassification

31 March 2023

1 April 2021

Cash-flows

- Repayment

- Proceeds

Non-cash

- Fair value

- Converted

- Additions

- Reclassification

31 March 2022

24. Share capital and reserves for Group and Company

Called up share capital

Allotted, called-up and fully paid

89,285,291 (2022: 88,335,079) ordinary shares of 1p each

Reconciliation of the number of ordinary shares outstanding:

Opening balance

Shares issued

Vista Acquisition

Converted loan note

Fundraise

Share options exercised

Closing balance

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 the Group changing reporting currency from
pounds sterling to USD.

Converted loan note reserve

Represents the gain recognised on conversion of historic loan notes.*

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.

Interest in own shares

Other reserves

This arises from ZEST and concerns historical transactions as part of the Group’s employee
benefit trust.

Created as part of the reverse takeover between Kazoo3D plc and ZOO Media Corporation
Ltd in 2001.

Accumulated losses
*In the current year the Directors have reviewed the converted loan note reserve and concluded that the losses within here represent
realised retained profits to which the Group and Company have unconditional entitlement. As such, the reserve has been transferred
to offset against accumulated losses.

Cumulative net losses recognised in profit or loss.

25. Borrowings

Non-current

Lease liabilities

Current

Amounts owed to subsidiary undertakings

Lease liabilities

Borrowings

Total borrowings

Group

2023

$000

6,968

1,408

2022

$000

7,830

1,313

Company

2023

$000

2,178

9,701

191

9,892

2022

$000

2,527

9,701

9,795

8,376

9,143

12,070

12,322

The group has renewed on 1 June 2023 with HSBC Bank US 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 1 June 2024.

The UK banking partner, HSBC, continues to provide an overdraft facility of £250,000. The principal outstanding at 31 March 2023
was nil (2022: 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.

Annual Report 2023ZOO Digital Group plc
ZOO Digital Group plc
Annual Report 2023

Lease liabilities
Lease liabilities are payable as follows:

At 31 March 2023 Group only

Less than one year

Between one and five years

Page 103

Future
minimum
lease
payments

$000

1,941

8,187

10,128

Present
value of
minimum
lease
payments

$000

1,408

6,968

8,376

Interest

$000

(533)

(1,219)

(1,752)

The lease periods range from between 1 and 10 years, with options to purchase the asset at the end of the term if applicable. Lease
liabilities are secured against the leased assets.

26. Trade and other payables

Current

Trade creditors

Amounts owed to subsidiary undertaking

Social security and other taxes

Deferred consideration

Accrued expenses

Non Current

Other payables

Deferred consideration

Group

Company

2023

$000

5,412

1,001

300

13,033

19,746

$000

300

Restated 2022

$000

12,379

654

1,300

11,551

25,884

$000

600

619

2023

$000

434

16,285

335

300

3,015

20,369

$000

300

2022

$000

543

4,423

358

1,300

2,690

9,314

$000

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

Contract liabilities as at 1 April 2022

New contract liabilities

Revenue recognised in the year:

That was included in the contract liability balance as at 31 March 2022

Relating to new contract liabilities in the year

Contract liabilities as at 31 March 2023

Group

2023

$000

4,836

(693)

Group

2022

$000

3,647

(774)

$000

774

1,344

(507)

(918)

693

Of the existing contracts that were unsatisfied or partially unsatisfied at 31 March 2023, revenue is expected to be recognised in the
financial year to 31 March 2024.

28. Commitments for Group and Company

Capital commitments
The group had no capital commitments at 31 March 2023.

Operating commitments

For FY2022 & FY2023 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.

Annual Report 2023ZOO Digital Group plcZOO Digital Group plc
Annual Report 2023

Page 105

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

Technology development

2 ordinary shares

100

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

USA

India

Sale & distribution technology products

Media production

10,000 shares of
common stock

100

100 shares of common
stock

100*

Employee share scheme

2 ordinary shares

100

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.

Related party transactions
The Company owns 20% of the shares in Ares Media. ZOO Digital Production LLC (subsidiary) owed Ares Media $19,027 at 31 March
23, payable on 45 day terms and purchased services from them of $185,074 in the year. ZOO Digital Limited (subsidiary) was owed
$2,500 from Ares Media at 31 March 23 and invoiced total sales of $6,008 in the year.

The Company owns 51% in Whatsub Pro. There were no amounts outstanding to or from the Group at 31 March 23. ZOO Digital
Production LLC (subsidiary) purchased services from them of $571,048 in the year.

The Company owns 35% in Vista India DM Inc. ZOO Digital Limited (subsidiary) owed Vista India DM Inc $481.50 at 31 March 23 and
invoiced total sales of $109,189 in the year.

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:

2023

2022

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

Weighted
average
exercise price

0.96

0.27

1.06

0.86

Options

No.

4,111,145

(524,667)

3,586,478

2,467,530

Options

No.

2,855,145

1,305,000

(37,500)

(11,500)

4,111,145

2,134,249

The underlying weighted average exercise price for the shares under option at 31 March 2023 was 70p (2022:35p).

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

6,765,673

(240,000)

6,525,673

5,342,122

0.69

0.25

0.71

0.52

5,238,673

1,575,000

(5,000)

(43,000)

6,765,673

4,653,570

Weighted
average
exercise price

0.58

1.76

0.36

0.96

0.49

0.37

1.76

1.33

0.69

0.31

The underlying weighted average exercise price for the shares under option at 31 March 2023 was 42p (2022:19p).

Under these schemes the percentage of shares that can be exercised is staggered over the exercise period with typically 40%
exercisable after the first year and a further 30% in each of the following two years.

Share options granted to key management personnel, including directors, during the year ended 31 March 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 10,112,151 outstanding options (2022: 10,876,818 options), 7,809,652 were exercisable (2022: 6,787,819).

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Annual Report 2023ZOO Digital Group plc
ZOO Digital Group plc
Annual Report 2023

Page 107

Options

Expiry date

Exercise price

Scheme

ZOO Digital Group plc EMI scheme

ZOO Digital Group plc Unapproved

Outstanding at the end of the year

No.

35,000

25,000

848,651

240,000

1,107,827

1,305,000

35,000

350,000

103,500

3,282,000

30,000

155,000

200,000

795,173

1,575,000

10,112,151

26 Sep 2023

19 Jan 2025

17 Sep 2025

2 Aug 2027

2 Jul 2028

13 May 2030

25 Jan 2032

26 Sep 2023

19 Jan 2025

17 Sep 2025

2 Aug 2027

5 Oct 2027

2 Jul 2028

30 Jun 2029

13 May 2030

25 Jan 2032

Share based payments have had the following impact on the group’s profit 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

0.24

0.23

0.20

1.33

0.89

1.76

0.24

0.23

0.20

0.49

1.33

0.80

0.89

1.76

2023

$000

1,650

2023

$000

4,391

0.1500

0.1525

1.01

0.73

1.30

0.1500

0.1525

0.3800

1.01

0.63

0.73

1.30

2022

$000

513

2022

$000

2,619

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.

Categories of financial instruments - Group

Financial Assets subsequently measured at amortised cost

Trade and other receivables excluding pre-payments and VAT (note 21)

Contract assets

Amounts owed by subsidiary undertakings (note 21)

Cash and cash equivalents

Total

Financial liabilities subsequently measured at amortised cost

Lease liabilities (note 25)

Contract liabilities

Amounts owed to subsidiary undertakings (note 25)

Trade and other payables excluding payroll taxes (note 26)

Total

Market Risk

2023

$000

14,217

4,836

11,839

30,892

2023

$000

8,376

693

19,066

28,135

2022

$000

21,252

3,647

5,962

30,861

Restated 2022

$000

9,143

774

25,230

35,147

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 2023 there was similar volatility in the
pound sterling/US dollar rate as in the previous year with the rate peaking at 0.93666 and falling to a low of 0.762515, with an average
rate of 0.8307. If the US dollar had remained at its highest level throughout the full year the group would have shown a post-tax profit
of $11.9m (2022: Profit $10.3m), if US dollar had been at its lowest level throughout the full year the group would have shown a post-tax
profit of $14.5m (2022: Profit $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 $13.5m (2022: $10.7m).

Transactions between the company and its subsidiaries are in US dollars, however the company is exposed to exchange rate
fluctuations due to the majority of its costs being denominated in pound sterling and through the revaluation of the company’s pound
sterling creditors.

The pound sterling/US dollar exchange rate at the 31 March 2023 was 0.813 (2022: 0.762).

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 June 2024. 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 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 June 2024.

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 2023.

Annual Report 2023ZOO Digital Group plc
ZOO Digital Group plc
Annual Report 2023

Page 109

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 2023

Borrowings

Lease liabilities

Trade and other payables

At 31 March 2022 (restated)

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

1,408

19,746

1,451

300

4,463

$000

1,054

Less than 1
year

Between 1 and
2 years

Between 2 and
5 years

Over 5 years

$000

1,313

25,884

$000

1,302

$000

4,039

$000

2,489

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 21.

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 (cash)/debt

Total equity

Total capital

Gearing ratio

33. Post Balance Sheets Events

2023

$000

8,376

(11,839)

(3,463)

35,133

31,670

Restated 2022

$000

9,143

(5,962)

3,181

24,992

28,173

(11%)

11%

On the 5th April 2023, we completed the acquisition of the remaining 49% of ZOO Korea that was owned by minority shareholders.
We issued 550,000 ordinary shares in ZOO Digital Group plc to the exiting shareholders of ZOO Korea and made a one-off payment
of $200,000 in consideration for their 49 per cent stake. The acquisition reflects the success of the initial investment and the outlook
for media localisation in the region.

In April 2023 we completed an 8.8% placing and retail offer of new equity raising a gross $15.8 million. This money is expected to
be used to acquire a business in Japan and accelerate our international footprint. The details of the fundraise are that the Company
with raised gross proceeds of £12.7 million ($15.8 million) through the oversubscribed placing of 7,914,242 Ordinary Shares with certain
existing and new institutional and other investors at a price of 160 pence per New Ordinary Share. The shares were admitted to
trading on 4 May 2023 and 12 May 2023.
On the 4th May we acquired 30% of AM Group in Spain for Euros 825,000. The investment marks the continued expansion of ZOO’s
geographic footprint in EMEA, with AM Group acting as a primary hub for ZOO’s operations in Spain and Portugal. It will deliver
dubbing services as part of ZOO’s global end-to-end offering for major studios and streaming services in Iberia, while also supporting
local content creators to expand their reach to global audiences.

Annual Report 2023ZOO Digital Group plcZOO Digital Group plc
Annual Report 2023

34. Restatement of prior period

Page 111

The Board has made two prior year restatements, one related to an incorrect basis of accounting for revenue and contract assets /
costs at the year end, and one related to the conclusion of fair values on a business combination (as expected under IFRS 3).

Incorrect basis of accounting

During 2023 the Group identified an error relating to its application of IFRS 15 ‘Revenue from Contracts with Customers’ in respect
of the recognition of costs incurred on partially completed contracts, where performance obligations were not wholly satisfied as
at the reporting date. Under IFRS 15, as the Group applies the output method to account for its partially completed performance
obligations, the costs should be expensed in the period in which they were incurred; previously, the Group had incorrectly performed
a matching exercise such that costs were accrued or deferred to match the revenue recognised under the output method.

This has resulted in a material understatement of cost of sales in 2022, and a material overstatement in accruals and prepayments. As
a result, the prior year has been adjusted as per below (decrease in profit of $1,266,000).

Consolidation of statement of comprehensive income (extract)

Revenue

Cost of sales

Gross profit

Profit/(loss) before tax

Tax on profit/(loss)

Profit for the year

Consolidated statement of financial position (extract)

Trade and other receivables

Total currents assets

Trade and other payables

2022

$000

70,403

(48,296)

22,107

Increase/
decrease

Restated
2022

$’000

(1,266)

$000

70,403

(49,562)

20,841

2022

$000

1,055

1,573

2,628

Increase/
decrease

Restated
2022

$’000

(1,266)

$000

(211)

1,573

1,362

2022

$000

25,992

35,601

64,432

2022

$000

(27,638)

(29,725)

Increase/
decrease

Restated
2022

$’000

(3,020)

$000

22,972

32,581

61,412

Increase/
decrease

Restated
2022

$’000

1,754

$000

(25,884)

(27,971)

Net assets

26,258

(1,266)

24,992

Consolidated statement of financial position (extract)

Accumulated losses

Attributable to equity holders

2022

$000

(56,703)

26,258

Increase/
decrease

Restated
2022

$’000

(1,266)

$000

(57,969)

24,992

Note 12. Income Tax (extract)

Profit/(loss) before tax

Tax calculated at standard rate of corporation tax of 19%

(deducted from)/accumulation of unrecognised losses brought forward

2022

$000

1,055

200

(200)

Increase/
decrease

Restated
2022

$’000

(1,266)

(200)

200

$000

(211)

(40)

We have assessed the impact of the misstatement and conclude that no material changes to the tax charge in 2022 are
required. As the Group has significant tax losses (see note 12) no tax would be provided for.

There is no change to net cash inflow from operating activities as a result of this prior period adjustment. However,
movements in trade and other receivables decreased from a position of $18,453,000 by $3,020,000 to $15,433,000 and
movements in trade and other payables decreased from $15,337,000 by $1,754,000 to $13,583,000.

The correction to profit has been shown through the Consolidated Statement of changes in equity on page 71.

The correction to prepayments and accruals as at 31 March 2022 can be seen in the Consolidated statement of financial
position on page 69, and has also had consequential amendments on other notes to the financial statements, most notably
the segmental analysis (note 4) and the earnings per share (note 14).

Basic and diluted earnings per share for the prior year have been restated. The amounts of the correction for basic and
diluted earnings per share was a decrease of 1.5 and 1.3 cents per share respectively.

Business combination

Details of the restatement are provided in note 18, and reflect the expected changes arising as at the date of approval of the
prior year’s financial statements in respect of an incomplete measurement period. Following confirmation of the fair value of
assets acquired during the measurement period, the values have been retrospectively adjusted as per the requirements of
IFRS 3.

Although these amendments have been recognised as a prior year adjustment, due to the timing of the acquisition late in the
prior year no amortisation has been charged on the customer relationships and as such there is no impact on the Group’s
reported results for the prior year.

Annual Report 2023ZOO Digital Group plcPage 113

GROUP DIRECTORY

Head Office

ZOO Digital Group plc

ZOO Digital Limited

ZOO Digital Production LLC

Castle House

Angel Street

Sheffield

S3 8LN

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.

Vista India Digitek Private Limited

Castle House

Angel Street

Sheffield

S3 8LN

United Kingdom

2201 Park Place

501, 5th Floor

Suite 100

El Segundo

CA 90245

USA

Modi House of Link Road, C-10

Dalia Estate, Andheri West Mumbai

Mumbai City MH 400053

India

T: +44 (0)114 241 3700

F: +44 (0)114 241 3701

T: +1 310 220 3939

F: +1 310 220 3958

Vista Tanweer Studios Private Limited

Gala 5-C, 5th Floor

Modi House, Plot No. C-10

Veera Desai Road

Andheri (West) MH 400058

India

ZOO Digital Group plc