Zoo Dig­i­tal is find­ing its growth voice

Stream­ing TV boom to spark big de­mand drive for Zoo Dig­i­tal

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TV and film broad­cast ser­vices busi­ness Zoo Dig­i­tal (ZOO:AIM) is set to make a profit break­through early next year. An­a­lysts at Fin­nCap an­tic­i­pate $300,000 of pre-tax profit for the 12 months to 31 March 2018 on a 27% jump in rev­enue to $21m. Last year Zoo re­ported sales of $16.5m and a mod­est pre-tax loss.

The Sh­effield and Los An­ge­les-based busi­ness has spent years try­ing to es­cape a sub-scale trap. Part of the so­lu­tion is to use an in-house de­signed, multi-tools tech­nol­ogy plat­form called ZOO Core.

The tech­nol­ogy plat­form al­lows the com­pany to pro­vide niche lo­cal­i­sa­tion ser­vices, ef­fec­tively adapt­ing films and TV shows for over­seas mar­kets.

The big op­por­tu­nity is us­ing ac­tors to pro­vide di­a­logue dub­bing into lo­cal lan­guages, and sub­ti­tles.

There are many other lo­cal­i­sa­tion ser­vices that Zoo pro­vides to make a pro­gramme cul­tur­ally and legally suit­able for a par­tic­u­lar mar­ket. These in­clude edit­ing out ac­tors smok­ing or drink­ing al­co­hol, putting cloth­ing on naked cast mem­bers and even chang­ing in­ap­pro­pri­ate back­ground scenery.

Zoo works with all six of the big Hol­ly­wood film stu­dios (20th Cen­tury Fox, Warner Bros, Para­mount, Columbia, Uni­ver­sal and Walt Dis­ney) and ma­jor TV broad­cast­ers such as BBC World­wide, ABC, NBC, CBS and HBO.

The pro­lif­er­a­tion of sub­scrip­tion-based on­de­mand stream­ing ser­vices is ramp­ing up de­mand. Zoo works with Net­flix, the big player in the stream­ing mar­ket, plus Google and Ap­ple.

ZOO DIG­I­TAL GROUP

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Hulu, Roku, Vevo and NowTV are just some of the many other stream­ing broad­cast­ers to have emerged in re­cent years.

Fin­nCap es­ti­mates the po­ten­tial for around 3,600 po­ten­tial lo­cal­i­sa­tion TV episodes an­nu­ally made in the US.

Zoo’s chal­lenges in­clude ac­cess to skilled voice dub­bing. Zoo be­lieves that work­ing closely with dig­i­tal dub­bing edi­tors is one way of con­trol­ling ac­cess to act­ing tal­ent.

This is a project-based op­er­at­ing model with un­pre­dictable rev­enue. The com­pany ad­mits that it sel­dom has more than three months’ for­ward vis­i­bil­ity.

A last point worth con­sid­er­ing is Zoo’s heavy reliance on a sin­gle cus­tomer, which rep­re­sented 44% of last year’s in­come. Zoo hopes to cut that per­cent­age by win­ning new clients which will di­lute this reliance over time.

Hav­ing shot up from 16p in the sum­mer to the cur­rent 57.1p, the stock is ex­pen­sive and trades on 2.7-times this year’s fore­cast rev­enue, or about 28-times ex­pected $2m earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion (EBITDA).

Main­tain­ing the fast pace of growth may see those val­u­a­tion met­rics re­duce to com­fort­able lev­els in time. (SF)

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